European Central Bank policy makers flagged protectionism as a key source of uncertainty for the euro area, even as they reaffirmed that the region’s growth momentum is still solid.

“It was widely cautioned that uncertainty around the outlook had increased” as “risks related to global factors, including the threat of increased protectionism, had become more prominent and warranted monitoring,” an account of the April 25-26 monetary-policy meeting said. “Despite the observed moderation in activity, confidence in the underlying strength of the euro-area economy and the eventual convergence of inflation to the Governing Council’s inflation aim remained unchanged.”

A string of disappointing economic data in the euro area and uncertainty over U.S. trade policy are giving ECB officials a reason to think twice about their plans to gradually reduce monetary stimulus. While Governing Council members have reaffirmed their confidence that the growth and inflation outlook hasn’t been fundamentally derailed, concern is mounting that the slowdown may be something more than a temporary dip.

Officials used their April meeting to take stock of the latest indicators ahead of a more comprehensive discussion about the economic outlook at their next monetary-policy session in Riga on June 14. At that time, updated growth and inflation forecasts will be available that will form the basis for a discussion about whether and how to end quantitative easing. Asset purchases are currently scheduled to end in September.

Temporary or Permanent

While policy makers viewed overall risks to the economy as “broadly balanced” at their April session, those stemming from the global outlook were seen on the rise.

One of the topics discussed was whether the “moderation” of euro-area growth was a consequence of labor shortages and insufficient output capacity in the economy, or rather a sign of slowing momentum.

“It was necessary to distinguish between temporary and potentially more last influences and to determine the extent to which they reflected a softening in demand as opposed to the emergence of supply constraints,” according to the account. “It was also remarked that turbulent trade relations had the potential to give rise to disorderly movements in exchange rates and to heightened volatility in financial markets.”

Policy makers said incoming data ahead of the June meeting would be closely scrutinized to assess the underlying health of the economy. A survey of purchasing managers this week pointed to a more pronounced slowdown.