European Central Bank President Mario Draghi said large-scale asset purchases are part of the central bank’s toolkit, but for now it would focus on its latest set of stimulus measures.

Draghi told Dutch newspaper De Telegraaf in an interview published on Saturday that the eurozone recovery was still weak, uneven and vulnerable and that interest rates would stay low over a longer period.

Asked what needed to happen before the ECB would start buying assets to give banks more money to lend, also known as quantitative easing, Draghi said “that would be the answer to a deterioration of inflation expectations over the medium term”.

“At the moment, however, we are focusing on the measures announced on June 5,” Draghi was quoted as saying.

The ECB’s target for medium-term inflation is below, but close to two per cent, a far cry from the current level of 0.5 per cent, which has sparked concern the eurozone could enter a Japan-style deflationary spiral of falling prices, slowing growth and waning consumption and investments.

At the June policy meeting, the ECB cut interest rates to record lows — the deposit rate below zero — and launched a series of steps to boost lending to companies.

Draghi said after the meeting the ECB could still do more if necessary.

Buying government bonds “is indeed possible within our mandate, namely if the purchases are aimed at ensuring price stability,” Draghi told the paper. “Quantitative easing can include not only government bonds, but also private sector loans. We will discuss that when the time comes,” Draghi said.

But he emphasised that the ECB had not seen any deflation in the sense of prices declining across the whole spectrum in the eurozone, with households and firms postponing consumption and investment because they are waiting for lower prices.

The recovery was still vulnerable, however, and Draghi warned that disruptions in the global economy could “quickly change the situation”. Persistently low inflation also made adjustments more difficult, Draghi added.

Asked how long interest rates would remain low, he said: “We have prolonged banks’ access to unlimited liquidity up to the end of 2016. That is a signal. Our programme in support of bank lending to businesses will continue for four years. That shows that interest rates will remain low over a longer period.” Thereafter rates would increase when the recovery firmed up.

Perfect monetary union

A key step that took the sting out of the European debt crisis was Draghi’s signature policy — the OMT bond-buy plan he launched in 2012 to back up his pledge to do “whatever it takes” to save the euro.

Even without deploying the tool, markets calmed down.

Draghi said he was, like many others, surprised by the magnitude of the effect the programme has had.

“We were all surprised,” he said, adding that the programme despite not being used so far could be activated if needed.

“In order to be credible, we also had to be sure that we could actually use the instrument. We were not bluffing, most certainly not,” he said.

Turning to eurozone politics, Draghi said “far more is necessary for a perfect monetary union” and suggested to subject structural reforms to union-wide discipline, too.

“In the case of the budget agreements, sovereignty has been shared among member states. That should also be done with respect to the labour market, competitiveness, bureaucracy, agreements on the internal market,” Draghi said.

“You could grant greater powers to the European Commission, or to the member states within the European Council, or you could create new European institutions. That is not for me to decide.”