European Central Bank President Mario Draghi laid the foundation for a potential re-opening of the Bank's controversial quantitative easing program Tuesday, telling a conference in Portugal that it has room to buy more bonds in order to stoke inflation in the currency area just hours ahead of the Federal Reserve's own rate-setting meeting in Washington.

Draghi said the Bank's asset purchase program, which it uses to buy government, agency and corporate bonds in order to lower market yields and stoke currency area inflation, has "considerable headroom", suggesting it could re-start purchases in the coming months. Draghi also said that negative interest rates "have proven to be a very important tool in the euro area", another suggestion that the Bank is likely to ease policy soon, given that inflation is running well shy of its 'just below 2%' target and growth remains weak.

"The Treaty requires that our actions are both necessary and proportionate to fulfil our mandate and achieve our objective, which implies that the limits we establish on our tools are specific to the contingencies we face," Draghi said. "If the crisis has shown anything, it is that we will use all the flexibility within our mandate to fulfil our mandate - and we will do so again to answer any challenges to price stability in the future."

The euro fell to a two-and-a-half week low of 1.1183 against the U.S. dollar immediately following Draghi's comments, while benchmark 10-year German bund yields, a proxy for risk-free interest rates in the region, fell to a fresh record low of -0.30%.

Eurozone inflation slowed to 1.2% in May, down from 1.7% in April, according to the most recent data from the region's statistics office, while market-based gauges of inflation expectations have been trading at all-time lows for much of the past ten days.

"In the absence of improvement, such that the sustained return of inflation to our aim is threatened, additional stimulus will be required," Draghi said. ""That aim is symmetric, which means that, if we are to deliver that value of inflation in the medium term, inflation has to be above that level at some time in the future."

The comments also come just hours ahead of the U.S. Federal Reserve's two-day rate setting meeting in Washington, and could add further pressure on Chairman Jerome Powell to move more quickly on rates, given the weakness in the euro currency and its impact on the U.S. dollar.

U.S. President Donald Trump has often cited weaker global currencies as a pretext for rate reductions from the Fed, arguing they create a "big disadvantage" for American firms.

Earlier this month, Draghi said that risks to the Eurozone economy were "tilted to the downside, on account of the prolonged presence of uncertainties, related to geopolitical factors, the rising threat of protectionism and vulnerabilities in emerging markets". 

Speaking to the media in the Lithuanian capital of Vilnius, Draghi rejected a question from the media that suggested the Bank would prefer to use non-traditional tools, instead of interest rate cuts, should the region's economy and inflation slow further into the second half of the year, adding that he and his colleagues can use all of its policy tools if needed. He also said that today's rate cut discussion was focused on the Bank's overnight deposit facility, which stands at -0.4%.

"The readiness to act in case of adverse contingencies, this time the discussion has become more granular in the sense that several members raised the possibility of further rate cuts, other members raised the possibility of restarting the asset purchase programme or further extensions in the forward guidance," Draghi said.