By Tom Fairless 

FRANKFURT -- The European Central Bank left its policy mix unchanged Thursday, extending a long period of easy money as the export-focused eurozone economy struggles to rebound from a slowdown in global trade.

Some overseas risks have eased in recent weeks, as the U.S. signed a trade deal with China and the U.K. voted to press ahead with Brexit. But tensions and uncertainties persist, and there are few signs so far of a rebound in Europe's large manufacturing sector.

Investors will now turn to ECB President Christine Lagarde's news conference at 08:30 ET for clues as to the bank's next policy steps. They will parse Ms. Lagarde's words for any signs of her policy leanings, almost three months into her eight-year term.

Investors currently expect the ECB to remain on hold for at least 18 months, according to futures prices, as the bank conducts a sweeping review of its policy goal and tools.

Recent data and surveys suggest that growth has stabilized at a low level, while inflation is edging up. Germany's economy, the region's largest, is expected to have grown slightly at the end of last year according to the federal statistics agency, but its large manufacturing sector remains mired in recession. Italy's economy is barely growing and the nation's coalition government looks increasingly shaky following the resignation of the 5 Star leader Luigi Di Maio. Job growth across the region has tailed off, which will put pressure on household spending.

The ECB responded aggressively in September to last year's economic slowdown, cutting its key interest rate to minus 0.5% in September and relaunching a giant bond-buying program known as quantitative easing, or QE. The bank has left open the option of cutting interest rates again if the economic outlook worsens. A recent ECB report suggested it could cut interest rates to minus 1% or perhaps lower.

However, some ECB officials have voiced concerns about the side effects of years of easy money. The minutes of the bank's December policy meeting showed officials were concerned about the possible impact of negative rates on the region's households, and called for close monitoring of savings and consumption behavior.

Such concerns could be addressed by the ECB's strategic review, which is expected to run all year. Ms. Lagarde might unveil new details about those plans on Thursday. She might also elaborate on how she sees the economic outlook, and how policy makers might respond to any changes.

Ms. Lagarde "has so far been a moderator at the helm of the ECB," helping to heal a rift among top officials over its recent aggressive policy moves, but not yet hinting at possible next steps, said Carsten Brzeski, an economist with ING Bank in Frankfurt. "Market participants might need somewhat more guidance soon."

Write to Tom Fairless at tom.fairless@wsj.com

(END) Dow Jones Newswires

January 23, 2020 08:11 ET (13:11 GMT)

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