ECB Officials See Deeper Uncertainty as Euro-Zone Economy Cools

(Bloomberg) — European Central Bank officials acknowledged deepening uncertainty over the euro-area outlook as they addressed market expectations that they won’t be able to raise interest rates next year.

Governing Council members from across the bloc held public appearances on Friday, a day after the Frankfurt-based institution halted its 2.6 trillion-euro ($2.9 trillion) bond-buying program despite a slowing economy. Purchasing managers surveys published as they spoke showed the momentum may be even weaker than thought.

After earlier this year betting the rates would start rising in late 2019, investors now see the first hike being put off until the first quarter of 2020. One governor to push back against that perception was Austria’s .

“If the market sees it more negatively in the sense that it will take longer, then that’s a worrying perspective because behind that is clearly the assumption that economic developments are weaker than is currently being recorded. Our data don’t show that.”

Updated ECB projections published Thursday showed the economy continuing to expand, albeit at a slightly slower pace than previously expected. President Mario Draghi said downbeat market expectations create easier financing conditions that could in fact aid growth.

Vice President Luis de Guindos, speaking in Frankfurt, said financial markets “appear to be aligned with our policy” — though he acknowledged how hard it currently is to predict the economic outlook.

“We are — if you allow me to say that — in a dark room that sometimes gets darker, and in a dark room you need to be very cautious and try to keep your optionality to the maximum.”

French Governor Francois Villeroy de Galhau said in a radio interview that there is a lot of uncertainty around the outlook, listing risks including Brexit, protectionism, Italy’s budget and weakness in emerging markets.

Lithuania’s Vitas Vasiliauskas took a relatively gloomy view in Vilnius, saying the negative risks appear to be starting to outweigh the euro zone’s positives.

“The balance of risks is very mixed. I would say trends are tilted toward the negative.”

The Governing Council took a slightly more nuanced view when it met, saying risks to growth are still “broadly balanced” but are starting to move to the downside.

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