ECB still sees balanced economic outlook, but downside risk more prominent

FRANKFURT (Reuters) – The European Central Bank maintained on Thursday its long-standing assessment that risks to growth remain “broadly balanced”, but acknowledged that downside elements were becoming more prominent.

Growth in the 19-member euro zone has slowed more than expected in recent quarters.

“The risks surrounding the euro area growth outlook can still be assessed as broadly balanced,” ECB President Mario Draghi told a news conference on Thursday.

The ECB Governing Council’s decision to maintain this outlook was unanimous.

However, the balance was moving to the downside owing to uncertainties “related to geopolitical factors, the threat of protectionism, vulnerabilities in emerging markets and financial market volatility”, Draghi added.

With France and Italy in political turmoil, a global trade war looming large, and Germany struggling to rebound after a dismal third quarter, markets have long seen the ECB’s growth assessment as overly optimistic.

But a formal downward shift in the balance of risk assessment would have led investors to expect a policy response.

Earlier on Thursday, the ECB decided end its asset purchase scheme but otherwise kept policy broadly unchanged.

The ECB reviews growth projections once a quarter and its growth risk assessment every six weeks.

Reporting by John Stonestreet; Editing by Catherine Evans

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