* Cites risks of further drop in euro zone inflation
* Draghi says confident June measures will boost demand
* Euro zone recovery remains "uniformly weak"
(Adds Draghi comments, background)
By Howard Schneider
JACKSON HOLE, Wyo, Aug 22 The European Central
Bank is prepared to respond with all its "available" tools
should inflation in the euro zone drop further, ECB President
Mario Draghi said on Friday in remarks that opened the door to
possible policy action in September.
Speaking at a global central banking conference in Jackson
Hole, Wyoming, Draghi said he is confident that stimulus steps
announced in June, helped by a weaker euro, will boost demand in
the ailing economic bloc.
But in stronger language than he has used in the past,
Draghi stressed the central bank stands ready to do more. Recent
growth data confirmed the currency bloc's recovery remained
"uniformly weak," he said, promising to keep the policy stance
accommodative for an extended period of time.
"The (ECB's) governing council will acknowledge these
developments and within its mandate will use all the available
instruments needed to ensure price stability over the medium
term," he said at a luncheon attended by many of the world's top
central bankers including Federal Reserve Chair Janet Yellen.
"I am confident that the package of measures we announced in
June will indeed provide the intended boost to demand, and we
stand ready to adjust our policy stance further," he said.
"The governing council would use also unconventional
instruments to safeguard the firm anchoring of inflation
expectations over the medium- to long-term," he added.
The ECB's governing council will meet next in early
Draghi did not, however, offer a qualifier as he did in
introductory remarks at his August news conference when he
added: "... should it become necessary to further address risks
of too prolonged a period of low inflation."
The ECB cut interest rates to record lows in June and
launched a series of measures to pump money into the sluggish
euro zone economy, where inflation has been in what Draghi has
called "the danger zone" of below 1 percent for 10 months.
On Friday he said the drop in inflation was likely due to
temporary factors such as energy prices and the Ukraine crisis.
Euro zone inflation was 0.4 percent in July, the weakest
level since October 2009 and a far cry from the ECB's target of
below but close to 2 percent.
It is expected to weaken further in August.
Large-scale asset purchases, also known as quantitative
easing (QE), represent the most powerful tool left in the ECB's
toolbox, although Draghi did not mention them in his speech.
He said he expected support for the economy from a weaker
euro, a planned scheme to revive Europe's market for securitised
loans and the ECB's new long-term loan plan, dubbed TLTROs, for
which he said there was "significant interest from banks."
The euro on Friday hit its weakest level against the dollar
since September 2013.
Calls for the ECB to do more grew louder after data showed
growth ground to a halt in the second quarter, dragged down by a
shrinking economy in Germany and a stagnant France, even before
any impact from sanctions imposed on and by Russia over Ukraine.
Draghi, in his speech, made clear neither monetary nor
fiscal policy alone could solve Europe's problems, urging
governments to push ahead with structural reforms, such as
making labour markets more flexible.
(Additional reporting by Jonathan Spicer in Jackson Hole;
Additional writing by Eva Taylor in Frankfurt; Editing by Susan
Fenton and Paul Simao)