Mario Draghi hedges on ECB's stimulus options

WASHINGTON -- European Central Bank President Mario Draghi on Saturday acknowledged the challenges of using U.S.-style bond purchases to jolt the euro zone from weak growth and said officials may instead have to consider other measures.

Draghi, who spoke to reporters after the International Monetary Fund's annual spring meeting in Washington, D.C., gave no indication that the ECB is closer to deciding whether to launch a stimulus program to combat low inflation that threatens to slow the region's nascent emergence from recession.

Last week, he said ECB policymakers unanimously agreed that they were prepared to use "unconventional" tools, besides lowering interest rates.

Low inflation can lead to deflation, or falling wages and prices that prompts consumers to put off purchases, which slows growth and makes it tougher for governments, businesses and consumers to pay off debts. The area's inflation fell to an annual rate of 0.5% in March, well below the ECB's 2% target.

Draghi said Saturday, "We see no evidence that people are postponing their spending patterns." ECB officials, he said, expect growth to accelerate toward the 2% target later this year as food and energy prices pick up. He added that low inflation has its advantages, such as making products and services more affordable for consumers.

But acknowledging the perils of falling prices, he added, "We should not be complacent."

Many economists expect the ECB to purchase massive amounts of bonds to push down long-term interest rates, similar to the program the Federal Reserve undertook in the aftermath of the 2008 financial crisis and is now winding down. But Draghi conceded the size of the eurozone asset-backed bond market is limited to about $100 billion, noting that corporate borrowing in Europe is mostly done through banks.

"We may need to consider other unconventional measures," he said.

He was not more specific. But in an interview, IMF First Deputy David Lipton said the ECB could buy assets dir! ectly from bank balance sheets, instead of in the bond market.

Another option is the ECB could push near-zero interest rates into negative territory, meaning banks would have to pay to park their money at the ECB, theoretically prodding them to lend the money instead.

Draghi also downplayed the ability of monetary policy to address the region's 12% unemployment rate. "If you think monetary policy can fix all the problems in the world, you're wrong," he said.