European Central Bank chief Mario Draghi on today warned that risks to the eurozone economy were now tilted “to the downside”, acknowledging for the first time that waning global momentum was weighing on the region’s outlook.
But he stressed the ECB had “not run out of” tools to tackle worsening headwinds, suggesting the bank was in no rush to tighten monetary policy even after it last month ended a major stimulus scheme.
“We have a long list of instruments and we stand ready to use them, adjust them according to the contingency that is produced,” Draghi told reporters.
Speaking afer the ECB’s first governing council meeting of the year, Draghi said policymakers were unanimous “about acknowledging the weaker momentum and changing the balance of risk for growth”.
In past meetings, the ECB had assessed the risks as “broadly balanced”.
But fears of a global downturn have grown as markets fret over Brexit, stuttering Chinese growth and the fallout from US-led trade tensions.
“The risks surrounding the euro area growth outlook have moved to the downside on account of the persistence of uncertainties related to the geopolitical factors and the threat of protectionism, vulnerabilities in emerging markets and financial market volatility,” Draghi said.
The latest hard and soft economic data have “continued to be weaker than expected,” he added, blaming “softer external demand and some country- and sector-specific factors”.
Eurozone growth slowed to 0.2 percent in the third quarter of 2018, after an expansion of 0.4 percent in the two previous quarters.
Most experts believe the fourth quarter figures will also disappoint.
– ‘All tools available’ –
The darkening clouds come after the ECB in December ended a massive government and corporate bond-buying scheme that been propping up the eurozone economy.
The easy money scheme saw the Frankfurt institution pump 2.6 trillion euros into the eurozone economy over a nearly four-year period.
Its end marked the removal of a key pillar of support to the economy, with the ECB saying it was confident the region could weather upcoming headwinds and that inflation was on track to meet the bank’s goal of just under 2.0 percent.
Since then however, the International Monetary Fund (IMF) has downgraded its 2019 growth forecast for the 19-nation currency bloc to 1.6 percent — slightly lower than the ECB’s 1.7-percent estimate.
Eurozone inflation meanwhile has fallen back — notching up just 1.6 percent in December.
Draghi on Thursday stressed that ECB policymakers assessed “the likelihood of a recession as being low” but that an “ample degree” of monetary accommodation remained necessary.