By Leigh Thomas and Balazs Koranyi
PARIS/FRANKFURT (Reuters) - European Central Bank policymakers promised on Friday to tread carefully in removing stimulus any further, just as two fresh surveys pointed to an even bigger-than-projected slowdown in the euro zone's growth.
ECB President Mario Draghi warned on Thursday that a dip in the 19-member euro zone's economy could be deeper and longer than thought even a few weeks ago, comments widely seen as signaling a delay in the bank's first interest rate hike.
Indeed, a key German business morale indicator fell for the fifth straight month in January, while the ECB's own survey of professional forecasters pointed to sharply lower growth and inflation.
"We remain committed to maintaining interest rates very low, which is good for the economy," French central bank chief Francois Villeroy de Galhau told France 2 television on Friday.
"Progressively we are withdrawing monetary stimulus ... but it is very progressive and depends on improvement in the economy. We'll take the time it takes," said Villeroy, widely seen as a leading candidate to take over from Draghi when his mandate expires in November.
The ECB ended its 2.6 trillion euro ($3 trillion) crisis-era asset purchase scheme last month and said it would keep rates at a record low 'through' the summer, signaling a rate hike late in the year.
SLOWDOWN
But markets have long given up on such a move, pricing a rise only for mid-2020 as the euro zone economy is suffering its biggest slowdown in more than half a decade, with no recovery in sight.
"The slowdown has surprised us ... we have to be very careful to monitor the data," ECB board member Benoit Coeure told Bloomberg television, arguing that the jury was still out on whether this growth dip is temporary.
The ECB's quarterly survey, a key element of Thursday's policy deliberations, put growth at 1.5 percent this year, well below a previous projection of 1.8 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 almost 2 percent is dipping.
Germany, France and Italy, the euro zone's biggest economies, barely grew last quarter and the Ifo warned that 2019 also started on a weak note.
"Disquiet is growing among German businesses," Ifo President Clemens Fuest said in a statement. "The German economy is experiencing a downturn."
Economists now widely expect the ECB to push out the timing of the first rate hike by adjusting its interest rate guidance, perhaps as soon as March.
It is also seen providing banks with more long-term loans to roll over previous facilities and shore up confidence in the financial sector.
"We could consider the provision liquidity and credit to banks, it's part of our toolbox," Villeroy said later in an interview with Bloomberg TV.