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ECB's Draghi: Downside risks increased again, need to review policy

Review policy in March: ECB's Draghi
Recovery needs to be supported with reforms
ECB leaves rates on hold

European Central bank boss Mario Draghi warned on Thursday that downside risks were increasing again and more stimulus might be necessary, causing a sharp move in equity and currency markets.

"It will therefore be necessary to review and possibly reconsider our monetary policy stance at our next meeting in March," Draghi told a news conference, making it clear that things had changed since December as oil prices fell sharply.

The fell 0.6 percent versus the dollar on his comments, breaking below the $1.08 level.

U.S. stocks also rallied sharply after his remarks, with Dow futures rising more than 115 points.

( for the latest on the markets.)

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ECB leaves rates on hold

Draghi's comments came after the European Central Bank left interest rates on hold on Thursday amid growing concerns over faltering global economic growth.

No new policy changes had been anticipated, but analysts predict that recent market volatility has upped the chance of the bank providing more policy support in the not too distant future.

The meeting comes as European stocks closed at their lowest level since 2014 on Wednesday, and have tumbled over 9 percent this year as concerns surrounding global growth, uncertainty in China and fresh lows in oil prices continue to grip markets.

As well as the slump in equity markets, inflation expectations have also fallen, credit spreads have risen, and the euro has strengthened against some major currencies. None of which are likely to put the ECB at ease.

Events of the past six weeks have certainly increased the chances of the ECB eventually providing more policy support. The plunge in the oil price to below $30 per barrel means that CPI inflation could average as little as 0.2 percent this year — well below the ECB's current forecast of 1 percent.

Meanwhile, news from China has added to concerns that industrial and export weakness in the euro zone may well persist into 2016, said Ben May, lead euro zone economist at Oxford Economics.