Eurozone's growth outlook is likely to face downside risks due to the persistence of uncertainties linked mainly to politics, trade wars and protectionism, European Central Bank President Mario Draghi warned on Thursday, as the bank confirmed that it is ending its massive asset purchase programme this month and trimmed the growth and inflation projections for next year.
"The risks surrounding the euro area growth outlook can still be assessed as broadly balanced," Draghi said.
"However, the balance of risks is moving to the downside owing to the persistence of uncertainties related to geopolitical factors, the threat of protectionism, vulnerabilities in emerging markets and financial market volatility."
The latest set of ECB Staff macroeconomic projections, which Draghi unveiled during his post-decision press conference in Frankfurt, showed that the euro area growth forecast for next year was trimmed to 1.7 percent from 1.8 percent.
The outlook for this year was cut to 1.9 percent from 2 percent.
The growth projection for 2020 was left unchanged at 1.7 percent and the bank forecast 1.5 percent expansion for 2021.
The inflation forecast for next year was lowered to 1.6 percent from 1.7 percent. The projection for this year was cut to 1.8 percent from 1.7 percent.
The inflation outlook for 2020 was left unchanged at 1.7 percent and the bank projected 1.8 percent price growth for 2021.
Earlier on Thursday, the Governing Council confirmed that it will be ending its four-year long EUR 2.6 trillion Asset Purchase Programme in December and left the key interest rates unchanged.
The main refi rate is currently at a record low zero percent and the deposit rate at -0.40 percent. The marginal lending facility rate is at 0.25 percent.
The ECB continues to guide that the key interest rates are set "to remain at their present levels at least through the summer of 2019."
The bank also said it is "enhancing its forward guidance on reinvestment" by stating that it will reinvest bond sale proceeds "for an extended period of time past the date when it starts raising the key ECB interest rates."
Markets expect the first interest rate hike to occur only in 2020 and the reinvestment to continue until late 2020.
Eurozone interest rates were raised last in July 2011 by 25 basis points.
Citing the underlying strength of domestic demand, Draghi expressed confidence that the growth momentum will continue and inflationary pressures would gradually rise.
"This supports our confidence that the sustained convergence of inflation to our aim will proceed and will be maintained even after the end of our net asset purchases," he said.
The bank's forward guidance on interest rates and reinvestments provide the necessary degree of monetary accommodation for the sustained convergence of inflation to aim of "below, but close to 2 percent", Draghi added.
"In any event, the Governing Council stands ready to adjust all of its instruments, as appropriate," the ECB chief said.
Responding to questions from reporters, Draghi said the latest policy decision was unanimous and policymakers did not discuss other tools of monetary policy.
"The general intention is to keep liquidity as available as it needs to be," Draghi said.
"We think we have instruments to address contingencies in this climate of great uncertainty, the monetary policy formulation wants to keep optionality as a dominant feature," he said.
Referring to quantitative easing, or QE, Draghi said it is part of the ECB's toolbox and considered useful in contingencies.
"At some points, QE has been the only driver of this [economic] recovery," he added.
