President Mario Draghi says the European Central Bank has plenty of instruments to push inflation higher and is determined and willing to act.
"We have plenty of instruments and especially we have the determination and willingness and capacity of the Governing Council to act and deploy these instruments," Draghi said at the World Economic Forum in Davos on Friday.
The ECB chief said the outlook for a gradual economic recovery in the euro zone had not changed and was likely to be supported by increased government spending on absorbing refugees.
Yet the outlook for inflation was still well under the bank's target of below but close to 2 per cent.
Draghi signalled on Thursday, after the bank's governing council left interest rates unchanged, that a further easing of ECB monetary policy was likely in March, telling a news conference the policy-making council was unanimous in its determination to act.
Asked in Davos about a financial market rout since the start of the year, he described it as "market vibrations, gyrations" and said it was premature to say the global economic outlook had worsened as a consequence.
"There's certainly a heightened sensitivity to risk but it's too early to say the perspective has changed. As far as we are concerned, we basically see a recovery that is continuing at modest pace but it's a regular one."
Dismissing concerns about divergence between the US Federal Reserve's December interest rate increase and the ECB's easing of monetary policy days earlier, Draghi said it reflected their different positions in the economic recovery cycle.
The ECB chief said the euro zone recovery was driven partly by cheap money and lower oil prices, which increased households' disposable income but also by government fiscal policies that had become "broadly neutral, if not slightly expansionary".
The influx of refugees fleeing war and conflict in the Middle East and North Africa would push governments to increase public investment spending further to accommodate the migrants, he said.
He acknowledged differences among European leaders over how to share the refugee burden was putting a strain on the European Union's institutions, including the Schengen zone of open-border travel.
But he said he was convinced they would reach a deal to cope with the challenge.
Draghi also said he was confident that Greece, which came to the brink of exit from the euro area last year, would achieve a positive first review of its third bailout program very soon.
