January 24, 2019 / 1:44 PM / 6 months ago

ECB says assessment of growth risks moved to downside

FRANKFURT, Jan 24 (Reuters) - The European Central Bank downgraded its growth risk assessment on Thursday, acknowledging multiplying headwinds and suggesting that it would take even longer to normalise its exceptionally easy policy stance.

ECB chief Mario Draghi argued that risks to growth are now tilted to the downside, ditching a long-standing view that they were broadly balanced, an apparent admission that the euro zone is slowing more than thought just weeks ago.

“The risks surrounding the euro area growth outlook have moved to the downside on account of the persistence of uncertainties related to geopolitical factors and the threat of protectionism, vulnerabilities in emerging markets and financial market volatility,” Draghi told a news conference.

With Germany, France and Italy, the euro zone’s biggest economies, barely growing in the fourth quarter, concerns are ripe that the ECB’s projections are too optimistic and will need to be cut once again at the bank’s next meeting in March.

While downgrading the risk assessment would appear to be an open acknowledgement of what is already obvious to investors, a change in the ECB’s guidance would risk fuelling expectations for policy action.

Some policymakers have argued that since the ECB is not yet prepared to take a concrete step, a guidance change not accompanied by a policy move would create an impression that the two are out of sync and lack coherence.

The ECB will next release economic projections on March 7 and major policy moves usually coincide with the publication of these forecasts. (Reporting by Balazs Koranyi; Editing by Catherine Evans)

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