In stronger language than he has used in the past, Draghi said on
Friday at an annual meeting of central bankers in Jackson Hole,
Wyoming, that the ECB was prepared to respond with all its
"available" tools should inflation drop further.
This increased speculation the ECB could embark on a large-scale
asset-purchase scheme known as quantitative easing (QE).
The ECB cut all its interest rates in June and flagged measures to
pump up to 1 trillion euros into the sluggish euro zone economy by
offering cheap long-term loans to banks.
The ECB has been struggling for months to lift inflation out of what
it calls a "danger zone" of sub-1 percent. Euro zone consumer prices
grew 0.4 percent in July and are expected to post 0.3 percent growth
in August on Friday, a far cry from the ECB's target of just below 2
Germany's Ifo business sentiment at 0400 EST was expected to add to
the picture of a lackluster euro zone economy.
German 10-year yields were down 3 basis points at 0.958 percent,
close to their record lows of 0.952 percent. German Bund futures
were up 43 ticks at 150.70.
"(Draghi's) comments are likely to keep alive the hopes that the ECB
adds more stimulus measures to push the inflation expectations back
upwards," said Suvi Kosonen, an analyst at Nordea.
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Trading was light due to a bank holiday in London.
Spanish and Italian 10-year yields fell 8 bps to 2.31
percent and 2.51 percent, respectively, while Portuguese yields
fell 14 bps to 3.12 percent.
(Reporting by Marius Zaharia, editing by Nigel Stephenson)
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