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ECB Draghi: Weaker forecasts don't account for risk of hard Brexit

Kitco News

FRANKFURT (Reuters) - European Central Bank President Mario Draghi said on Thursday the bank’s weaker economic forecasts did not take into account the possibility of Britain leaving the European Union without an exit deal, even though the chances of a hard Brexit have increased.

The growth and inflation forecasts also exclude the potential impact of recent global trade friction, he said.

“This baseline scenario is ... relatively favorable, because it doesn’t contain the case of a hard Brexit, for example - the probability of which has gone up over recent time,” Draghi told reporters.

“And it doesn’t contain some of the trade measures, trade escalation, at least, some of the trade escalation that has taken place since August. So in this, with this relatively favorable baseline scenario, there was a downgrade in inflation and inflation expectations.”

The ECB cut its inflation forecasts for the next three years and growth projections for 2019 and 2020, providing a key justification for the fresh stimulus package it announced earlier in the day.

The ECB earlier approved fresh stimulus measures to prop up the euro area economy, cutting rates deeper into negative territory and relaunching an extended bond purchase scheme.

Reporting By Francesco Canepa and Balazs Koranyi; Editing by Hugh Lawson and Toby Chopra

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