The European Central Bank has joined the International Monetary Fund in warning of risks to economic growth from the slowdown in China and other emerging markets.
After an IMF report spoke of larger-than-expected repercussions for other countries, the president of the ECB Mario Draghi announced that eurozone GDP expectations had been downgraded for both 2015 and 2016.
He told a news conference a return to falling prices, or negative inflation, was possible in the coming months despite its €1.1tn quantitative easing (QE) programme, which is due to run until next September in a bid to boost prices and activity.
Mr Draghi confirmed the governing council was "not yet" at a place where an expansion of QE was possible but he did not rule it out in future, adding that it was too early to predict the fallout from the financial and commodity market shocks over China.
The value of the euro plunged against the dollar and stocks rose immediately after his comments as investors craved the prospect of more QE.
China's woes are also being felt in the UK as exports continue to fall amid the lack of market confidence.
The latest Markit (NasdaqGS: MRKT - news) /CIPS Purchasing Managers' Index (PMI) survey, released on Thursday, suggested the powerhouse service sector grew at its weakest pace for more than two years in August.
The data culminated in a forecast of GDP growth for the third quarter of 0.5% - down from 0.7% between March and June, Markit said.
Its report was released as the IMF outlined its latest assessment of global threats ahead of the G20 meeting of finance ministers and central bankers in Turkey.
The findings indicated the scale of the challenges still facing world growth at a time when the US central bank is considering its first rise in interest rates since the financial crisis.
The headline was the economic slowdown in China, which the IMF declared as having larger-than-expected repercussions in other countries.
China's troubles have sent the prices of raw materials such as oil into a freefall, pinching Brazil, Russia and other commodity exporters.
A devaluation of the yuan last month had a limited impact amid the stock market turmoil of recent weeks, which has been largely blamed on China's struggles and fears of a US Federal Reserve rate increase.
The IMF said emerging-market countries should let their currencies fall substantially to support exporters and economic growth.
It also called for wider reforms to make their economies more efficient.