European Central Bank chiefs were divided at their September meeting over the danger to the eurozone economy from protectionism and other global threats, with some calling for a gloomier assessment. "It was remarked that a case could also be made for characterising the risks to activity as now being tilted to the downside," according to a regular account of the private gathering published by the ECB Thursday.
Following the September 13 meeting, ECB President Mario Draghi told journalists that risks to the 19-nation single currency area remained "broadly balanced". The account reveals colleagues on the institution's governing council had earlier highlighted "risks relating to rising protectionism, vulnerabilities in emerging markets and financial market volatility having gained more prominence recently".
In the end, policymakers decided to stick to the "broadly balanced" language. "The underlying strength of the economy was judged to be mitigating downside risks," they agreed. At its meeting in Bali this week, the International Monetary Fund (IMF) also expressed caution for the eurozone over growing risks, downgrading its 2018 growth forecast from 2.2 to 2.0 percent.
A slowdown in economic activity could trip up the ECB as it winds down its "quantitative easing" (QE) mass bond-buying scheme, designed to boost economic growth and inflation by pumping cash through the financial system and into the real economy. It is on the home stretch of its exit, slashing monthly purchases of government and corporate debt by half to 15 billion euros ($17.4 billion) in October before a planned stop in December.
But with inflation projected to hover around 1.7 percent between this year and 2020, the central bank remains short of its target of price growth close to, but below 2.0 percent. Even after the end of QE, it plans to keep interest rates at historic lows "through the summer of 2019" to help keep credit flowing to firms and households.