ECB's Draghi says balance of risks has shifted to the downside

The balance of risks which the Eurozone is facing has shifted to the downside, the currency bloc's monetary authority believes.

In his post meeting press conference, European Central Bank chief, Mario Draghi, indicated that underlying inflation was still seen increasing over the medium-term, even as he warned about the long list of risks which the currency bloc was facing, including from protectionism, doubts around the sustainability of the post-World War II multilateral framework, volatility in financial markets, and weaknesses in emerging markets.

When queried by journalists about the possibility that the ECB would launch another so-called Targeted Long-Term Refinancing Operation, Draghi said that at its meeting on Thursday, the Governing Council had focused on assessing the current situation and not on specific new measures such as another TLTRO.

Significantly, Draghi said the Governing Council had chosen to give itself more time in order to better gauge how persistent the negative impact from the current heightened uncertainty, on various fronts, would be.

The members of the GC had been unanimous regarding the shift in the balance of risks and when identifying the factors which lay behind the slowdown in the economy, Draghi said.

Among the latter, he mentioned "political developments in some euro area countries", slower growth in China, fading fiscal stimulus in the States and the situation that the German car industry was traversing.

Indeed, it was a long list of sources of uncertainty, which if they persisted, then one ought to expect weaker growth momentum beyond just the near-term, Draghi conceded.

Nevertheless, the GC was also unanimous that the risk of a recession was "low", he said.

Draghi also stressed that authorities in the different jurisdictions had already begun to respond to such factors.

Thus, some rate-setters on the GC were "confident" that the slowdown in China would not last long, pointing out that Beijing had adopted "strong" measures, that the impact from the ongoing trade disputes would wane and that the pain from Brexit would in the end not be that much.

As well, financing conditions were supportive, lower oil prices would buoy disposable income, bank balance sheets were "much stronger" than before the financial crisis started and hence the conditions for credit continuing to flow to the economy "were in place".

The GC was set to next meet in March, when the ECB's staff were set to release their updated macroeconomic projections.

As of 1347 GMT, euro/dollar was down by 0.57% to 1.13177.

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