By Tom Fairless

FRANKFURT--The European Central Bank issued a fresh warning over the economic fallout from Donald Trump's U.S. election victory, pointing to possible asset-price corrections and new protectionist measures that could harm global growth.

The warning comes as ECB policy makers prepare to decide whether to extend the central bank's controversial bond-purchase program at a rate-setting meeting next month, to support the region's weak economy and drive up ultra low inflation.

In its biannual report on financial-sector stability, the ECB said the U.S. was likely to become more "inward-oriented" under Mr. Trump.

"There may be some protectionist measures or not, every day we read contradictory news," the ECB's Vice President Vítor Constâncio told reporters.

Any such action would trigger a response from other countries, Mr. Constancio said. "That's very risky in a situation where world trade is already very weak," he said. "World trade and growth will suffer."

It is the second time in 10 days that the ECB has warned of possible negative repercussions from Mr. Trump's victory, which took investors and politicians by surprise, and sparked a global selloff in bonds.

Other central banks have been less forthright about their concerns. Bank of Japan board member Takako Masai cautioned this week about "uncertainty" around the economic policies that Mr. Trump might pursue, which she said could hurt sentiment in Japan.

The 19-nation eurozone runs a large and growing trade surplus with the rest of the world, and the U.S. is its largest trading partner.

The bloc's EUR10 trillion economy could be "directly impacted via trade channels and by possible spillover effects from higher interest and inflation rate expectations in the U.S.," the ECB said.

ECB officials are expected to decide on Dec. 8 whether to extend their EUR1.7 trillion bond-purchase program, which is due to expire in March. With economic growth still sluggish and inflation barely above zero, most economists expect the program to be extended by at least six months.

Top ECB officials have strongly signaled in recent days that the stimulus will remain in place.

Mr. Constancio said the ECB hadn't changed its economic scenario for the eurozone in the wake of the U.S. vote.

But he highlighted political uncertainty in other advanced economies, as well as vulnerabilities in emerging markets and among eurozone banks.

He pointed to a rise in bond yields in Italy ahead of a national referendum on Dec. 4, on which Prime Minister MatteoRenzi has staked his political future.

"It's basically political uncertainty that will trigger, or not, an economic shock," Mr. Constancio said of the Italian referendum. "Depending on the degree of that shock, we have to consider if we have to do anything or not."

Negotiations over the terms of Britain's departure from the European Union also "remain subject to considerable uncertainty not only in terms of duration and outcome, but also their long-term economic impact," the ECB said.

Todd Buell in Frankfurt contributed to this article.

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

(END) Dow Jones Newswires

November 24, 2016 08:17 ET (13:17 GMT)

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