Draghi: ECB will unleash stimulus if euro strengthens further

Mr Draghi said last month that the strength of the euro had undermined the ECB's attempts to stabilise the single currency bloc.

He emphasised on Saturday that the euro exchange rate was not a policy target and declined to state a specific level that would trigger further stimulus.

However, Mr Draghi said the strength of the single currency had reduced eurozone inflation by between 0.4 and 0.5 percentage points. Inflation has dropped from 2.7pc in the first quarter of 2012 to a current level of just 0.5pc.

Lower food and energy prices were also major factors keeping inflation low, Mr Draghi said. However, he added that the threat of deflation - or falling prices - was not imminent.

Deflation can pose a danger to economies because if prices are falling people put off spending in anticipation of further falls. It also makes it harder for governments and businesses to reduce debt burdens.

Mr Draghi also said the ECB's forward guidance policy had helped to reduce volatility in the eurozone. However, he said further tightening of US monetary policy could pose risks to the global economy.

"All central banks are aware of the spillovers that their decisions could create for other countries," he said.

Mr Draghi added that countries with fragile economies were more likely to suffer from further volatility.

"Spillovers might have an incidence upon countries inherently fragile because of their economic policy, or lack of it, and that's been the experience of the last year," he said.

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