By Marc Jones and Francesco Canepa
LONDON (Reuters) - The European Central Bank would need to introduce a broad asset purchase programme if the euro zone became trapped in a "vicious circle" of falling inflation expectations allied to an external shock, the bank's vice president said on Friday.
The ECB stopped short of launching quantitative easing stimulus via asset purchases on Thursday as it cut interest rates and launched a new refinancing operation.
Vitor Constancio opened the door for further action if inflation expectations started falling and an external shock hit the currency bloc's sluggish economy.
"If we see a sort of vicious circle emerge out of (low)inflation and an unanchoring of expectations and an outward shock that would create a reverse spiral, that would require a broad programme of asset purchases," he told an event in London.
Constancio said interest rates would remain at current levels as the euro zone needed inflation and growth rates to rise to help reduce a regional debt overhang.
"Interest rates will stay low, in this case stable, for an extended period of time," Constancio said.
He added the take-up of the ECB's new four-year 400 billion euro ($545 billion) refinancing scheme would depend on demand from banks.
The programme is designed to encourage banks, which have been holding back credit, to increase lending to businesses in the euro zone.
(Reporting By Marc Jones and Francesco Canepa; Editing by John Stonestreet)