In the accounts of January monetary policymeeting, ECB noted that “a stronger case could now be made for assessing the risks as having moved to the downside” In “large measure”, downside risks could be attributed to external environments including heightened protectionism and Brexit. But there were “pass-through and spillovers” to domestic demand.
ECB also acknowledged that “slowdown in euro area growth appeared to be deeper and more broad-based than previously anticipated”. And, “negative developments had become more widespread across the euro area, and risked affecting several components of demand”. The slowdown has previously be related primarily to trade. But private consumption growth was weaker in Q3, and employment growth decelerated. ECB noted that “if exports and consumption were both weaker, this was likely to be transmitted to investment in the period ahead. ”
All in all, “members concurred with the view that the risks to the euro area outlook had 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.” Outlook for economy would be “reassessed in more depth” in March meeting, when the new ECB staff projections would be available.