DAVOS (REUTERS) - Euro zone inflation is "way below target" and deflation is a potential risk for the bloc, International Monetary Fund Managing Director Christine Lagarde told the World Economic Forum in Davos on Saturday.

In response, European Central Bank President Mario Draghi said the ECB stood ready to act if inflation went lower than forecast and reaffirmed that interest rates would remain low or go lower for an extended period of time.

Asked about the possiblity of the ECB adopting quantitative easing policies such as the US, British and Japanese central banks had done, Mr Draghi said: "I'm not saying it should be done or it shouldn't be done."

The EU treaty prevented monetary financing of governments, he said. The ECB might be able to buy securitised bank loans if they could be packaged as asset backed securities in a transparent manner, which would require regulatory change, Mr Draghi added.