Euro headed for second weekly loss after ECB's warning

Draghi ECB

Draghi's comments will increase market speculation that the bank will delay a tightening in policy for several more months, or even move to cut rates.

He said that the bank was ready "to adjust all of its instruments" in case of unexpected trouble.

Europe's shares markets erased earlier gains and the euro rose off session lows after ECB President Mario Draghi said economic momentum was weakening but downplayed deploying LTRO funding.

Mario Draghi, president of the European Central Bank, said on Thursday that risks to the eurozone had "moved to the downside" as mounting protectionism, sluggish Chinese growth and Brexit uncertainty weigh on the region's outlook.

As well as the global turmoil, "another set of factors are specific to certain countries which has to do".

Most experts believe the fourth quarter figures will also disappoint.

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The bank has also said it will maintain the 2.6 trillion-euro ($2.95 trillion) pile of government and corporate bonds that it bought with newly printed money over nearly four years.

Its end marked the removal of a key pillar of support to the economy, with the ECB saying it was confident the region could weather upcoming headwinds and that inflation was on track to meet the bank's goal of just under 2.0 percent.

Inflation, the ECB's primary mandate, is now seen dipping to 1.5 percent and only rising to 1.8 percent in the "longer" term, suggesting that confidence in the central bank's ability to reach its target of nearly 2 percent is dipping. Annual headline inflation was 1.6 percent in December, down from 1.9 percent in November. Analysts expect the eurozone to grow by about 2 percent annually in the coming quarters, but it is unlikely that this year's GDP will reach 2.5 percent like last year.

"We can conclude that it's not true that the European Central Bank has run out of fuel or has run out of instruments". While it managed to halt the quantitative easing (QE) programme (although reinvestment of the proceeds continues), it seems unlikely at this stage that the European Central Bank will be able to join the Federal Reserve (Fed) in raising interest rates.

In the United States, the Federal Reserve has already responded to the weaker outlook by slowing down rate hikes.

The scheme allows banks to take out loans at very low, even negative rates, on the condition that they step up lending to firms and households.

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