ECB's Draghi sounds confident note but adds that risks have risen

European Central Bank chief Mario Draghi sounded a confident note on the economic outlook on Wednesday, but conceded that risks had risen recently and that negative interest rates might possibly be having some undesired 'side effects'.

Speaking at a conference in Frankfurt, Draghi said that a "soft patch" need not be the prelude to a serious slump and while weakness in foreign demand was lasting longer than expected, it had yet to spill over "significantly" into the domestic economy.

And while risks had increased in recent months, employment - the main driver of household consumption - was proving resilient, he said.

Hence, progress on hitting the ECB's inflation target had been "delayed rather than derailed", Draghi said, adding that if faced with a significant deterioration, then policymakers "will adopt all the monetary policy actions that are necessary and proportionate."

Draghi also weighed in on the running debate about whether the impact from negative rates on lenders' profitability might be too high a price to pay, including by crimping the supply of credit.

"If necessary, we need to reflect on possible measures that can preserve the favourable implications of negative rates for the economy, while mitigating the side effects, if any.

"That said, low bank profitability is not an inevitable consequence of negative rates."