Europe faces questions about where it's going, ECB's Draghi says

The European Central Bank is willing to do whatever is needed to bring inflation back towards its 2% target, according to three top officials on Thursday.

ECB President Mario Draghi warned of the challenges the central bank faces this year and left the door open to further policy action.

"We face uncertainty about the outlook for the global economy. We face continued disinflationary forces. And we face questions about the direction of Europe and its resilience to new shocks," he wrote in the monetary authority's annual report.

His remarks came as the ECB published an account of its 10 March policy meeting, when it announced a slate of new measures. The account cited worries about global markets, prolonged low inflation and a weaker economic outlook for the euro-area.

The ECB decided in March to expand its asset purchase programme and slash two of its main policy rates, the interest rate on the deposit facility rate and that on its marginal lending facility.

The minutes showed that there was broad support for the measures at the meeting.

However, some members later voiced concerns over the side-effects of rate cuts, including the impact it may have on banks’ profitability.

"We don’t think any of this rules out further action from the ECB altogether. With the economic recovery slowing and the euro rising, officials have already stressed since the meeting that interest rates could fall further and other measures are possible,"Jonathan Loynes, chief European economist at Capital Economics.

"Accordingly, we still think that a further extension of the asset purchase programme is likely at some point and would not entirely rule out more drastic measures such as some form of 'helicopter drop'."

In the ECB's annual report, Draghi also said the bank does not surrender to excessively low inflation and reiterated that it would use more measures within its mandate to address price instability if necessary.

"These decisions reaffirmed that, even when faced with global disinflationary forces, the ECB does not surrender to excessively low inflation."

The ECB's chief economist Peter Praet also expressed the central bank’s willingness to do more if warranted in a speech delivered in Frankfurt.

"If further adverse shocks were to materialise, our measures could be recalibrated once more commensurate with the strength of the headwind," he said.

Later on Thursday, ECB deputy Vitor Constancio echoed Draghi’s comments that the quantitative easing programme would boost economic output in the Eurozone by around 1.5% between 2015 and 2018.

He also stressed that the euro-area could not rely on ECB policy alone to lift growth and that individual governments must enact structural reforms.

"The ECB has done and ... will continue to do whatever is needed to pursue its price stability objective which now implies also trying to foster growth," Constancio said at the European Parliament in Brussels.

"However, other policies must also act."