Global trade tensions could slow euro zone growth further and European Central Bank policymakers debated last month whether to downgrade their risk assessment, minutes of their September meeting showed on Thursday.
But policymakers ultimately concluded that the domestic economy was showing enough resilience to consider risks broadly balanced, even if some argued that the factors behind the recent slowdown may not be temporary as earlier thought, the ECB said in the accounts of the Sept 13 meeting.
The ECB kept policy unchanged as expected last month, staying on track to wrap up a 2.6 trillion-euro ($3 trillion) bond purchases scheme this year and raise interest rates next autumn, continuing its slow but steady pace of policy tightening.
Indeed, even as trade tensions weighed on growth and a stock market selloff amplified growth fears, some policymakers argued that was not enough for the bank to backtrack on policy normalization.
"A gradual pace of monetary policy normalisation is justified," Finnish central bank chief Olli Rehn said in Indonesia on Thursday. "The current strength of the euro area economy supports our confidence that inflation will converge towards ... the ECB's price stability target."
But some policymakers appear to be increasingly cautions, according to the minutes.
"A remark was made that some of the factors behind the (downward growth) revisions might not be entirely of a transitory nature," the minutes showed. "It was also argued that there could be larger spillovers from weaker external demand to domestic demand."
Still, while some policymakers argued that the case could be made for downgrading the risk assessment, there was agreement that the underlying strength of the economy would mitigate the downside risks to activity.
"High-frequency indicators had stabilised and remained at elevated levels, underlining the overall robustness of economic activity," chief economist Peter Praet told policymakers at the meeting, the minutes showed.
With years of unprecedented stimulus finally lifting inflation, the ECB has been dialling back support, but only by the smallest of increments, fearing that bigger moves risked unravelling its work.
While the ECB has not explicitly pledged any rate hikes, policymakers, including Praet, have argued that they were comfortable with market expectation for a small increase in the fourth quarter of 2019, followed by only small and infrequent moves.
"To be any more precise than that, to lock in a date, to tie our hands, would be rather risky," Ardo Hansson, Estonia's central bank chief said at the annual meeting of the International Monetary Fund on Thursday.
"When we get closer, we can have another discussion if we need to adjust the language again, but this is not a debate we are going to have just yet," Hansson said.
Policymakers also concluded last month that domestic cost pressures continued to build and broaden, indicating that inflation would rise, moving back towards the bank's target of almost 2 percent after undershooting it for over five years.