Mario Draghi said on Friday that the European Central Bank may soon broaden its purchases of euro-denominated securities to infuse more central bank money into the financial system, in an effort to stimulate the economy.
"It is essential to bring back inflation to target and without delay," he said.
The ECB has a permanent official inflation target - it aims to keep annual consumer price inflation just below two percent. This reflects a widespread view amongst central bankers that deflation - a situation in which prices are dropping and money is increasing in value - is worse than mild inflation.
The reason is that if deflation sets in, two consequences result. First, people and businesses may begin holding off on spending in the expectation that goods will become cheaper in future - leading to a self-reinforcing slowdown in economic activity.
The eurozone's inflation rate was just 0.4 percent in October, and the ECB is worried that it is dangerously close to sliding into deflation. Indeed, deflation - in the form of dropping wages and prices - may already be setting in in some parts of the eurozone where unemployment is rampant and consumer demand is week.
Could a euro deflation spiral set in?
Central bankers are worried that the longer inflation stays at extremely low levels and aggregate consumer demand in the eurozone remains weak, the more businesses and consumers may come to expect deflation to set in - and such an expectation could become a self-fulfilling prophecy.
"We will do what we must to raise inflation and inflation expectations as fast as possible," Draghi said.
The ECB has already been buying so-called asset-backed securities on a large scale. It has repeatedly hinted that it might also consider buying government bonds, albeit not as primary issues from governments themselves - that is illegal under the Maastricht treaty of 1992 that created the European Union.
Instead, the ECB would buy government bonds that had previously been issued and sold to institutional investors like pension funds or banks. Such measures are often referred to as "quantitative easing" or QE in the jargon of finance.
Quantitative easing: Does it work? Is it dangerous?
QE is controversial, especially amongst conservative German central bankers like Jens Weidmann, the head of the German central bank - which like other eurozone national central banks is now effectively a division of the ECB, limited to administrative rather than monetary policy roles.
Economists are divided on whether or to what degree QE is effective at stimulating the economy, and on its distributional consequences. Many believe it benefits wealthy institutions and investors by pushing up bond and stock prices, but results in very little flow-through or "trickle down" to ordinary people.
Some experts - including Lord Adair Turner, former chief of the UK government's Financial Services Authority, and John Muellbauer, a professor of economics at University of Oxford#, and the New Economics Foundation - have been calling for central banks to non-debt money directly to governments, or to the European Union's fiscal arm instead, in sensibly calibrated quantities decided on by central bank monetary policy committees.
The purpose would be to make money available for spending on infrastructure or for distribution directly to eurozone citizens, and so stoke demand - without loading households or governments with even more debt.
Total bank debt per capita has been rising for decades - since the end of the second world war - and it is now at such a high level that efforts to stoke the economy by inducing people to take on even more debt are destined to fail. People feel over-indebted and want to pay down debt, not take on even more.
Mechanisms must therefore be found to repay already existing bank debt on a net basis - without causing an economic crash. Hence the calls from a growing chorus of monetary economists for central banks to inject non-debt money directly into the real consumer economy.