Bank of Finland cuts Europe growth forecasts on Brexit, Italy problems

September 29, 2016 4:00 AM EDT

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HELSINKI (Reuters) - Finland's central bank cut on Thursday its forecast for economic growth in Europe for next year, citing impacts from Britain's vote to leave the EU as well as weakened economic prospects in Italy.

The Bank of Finland slightly lifted its 2016 growth forecast for the EU22 countries -- the euro zone, Britain, Sweden and Denmark -- to 1.7 percent from a previous 1.6 percent, but cut it to 1.3 percent for 2017 and 1.6 percent for 2018 from 1.8 percent previously for both years.

"Europe's growth will be dampened also by internal factors which are not linked to Brexit, such as deterioration of Italy's growth outlook and problems in its bank sector," the bank said.

It forecast inflation within the same group of countries to be 0.4 percent this year, 1.4 percent in 2017 and 1.5 percent in 2018.

"Improvements in economic prospects and the ongoing accommodative stance of monetary policy will gradually begin to boost inflation. However, longer-term inflation expectations remain muted, which is a worrying trend," the bank said.

(Reporting by Jussi Rosendahl; Editing by Toby Chopra)



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