INSTANT VIEW 4-Slovak Feb EU-norm CPI slightly below fcast

...the annual inflation rate at 2.0 percent, 
data from the Statistics Office showed on Thursday. 
     
KEY POINTS: 
SLOVAK EU-NORM INFLATION    FEB 07    market forecast 
  pct change mo/mo           +0.1        +0.2 
  pct change yr/yr           +2.0        +2.1 
   
  (Details of Feb inflation data ............. [ID:nPRG000268]) 
 
- Food and non-alcoholic beverages, which have a strong 
weighting in the consumer price basket, rise by 0.5 percent 
month-on-month, after a 2.2 percent rise in January. 
- Housing, water, electricity, gas and other fuels, which 
pushed inflation up last year, rise by 0.2 percent on the month 
in January, compared with a 0.2 percent drop in January. 
- Annual price growth in the housing category, which has the 
strongest weighting in the basket, is 2.7 percent, after 3.1 
percent rise in January. 
- Transportation prices fall by 0.5 percent month-on-month, 
after a 0.3 percent drop in January. 
  
COMMENTARY: 
    MARIA VALACHYOVA, SENIOR ANALYST, SLOVENSKA SPORITELNA, 
BRATISLAVA 
    "It was in line with our expectations, there were no 
surprises in the structure either. 
    "This figure has a neutral in impact on monetary policy. We 
expect the central bank to lower interest rates in the second 
half of the year, since external inflation risks, mainly oil 
prices, still persist. We also expect the crown to weaken in 
April and in May due to outflow of dividend payments." 
     
    LUCIA STEKLACOVA, SENIOR ANALYST, ING BANK, BRATISLAVA 
    "Although an external shock cannot be completely ruled out, 
Slovakia's inflation outlook is very favourable. 
    "The recent crown firming has also increased chances for an 
earlier reduction in interst rate, which could come as early as 
in the second quarter. The monetary policy meeting in two weeks 
will be already a close call." 
     
    JURAJ VALACHY, ANALYST, TATRA BANKA, BRATISLAVA 
    "The data are encouraging for the crown. A favourable 
inflation outlook also gives the central bank room to lower 
interest rates. 
    "We have expected a 25 basis point rate cut in the second 
quarter, and we still maintain that. If the central bank does 
not want to tolerate a stronger crown, it will have to cut 
interest rates in the second quarter." 
     
MARKET REACTION: 
    The Slovak crown  shows no reaction to inflation 
data. The unit trades at 33.970 to the euro as of 0815 GMT, 
unchanged from Wednesday's close. 
     
BACKGROUND: 
- The central bank follows inflation calculated by the 
EU methodology as a part of Slovakia's plan to adopt the euro in 
2009. 
- Prices under the local methodology rose by 0.2 percent on the 
month in February, putting the annual rate at 2.7 percent. 
- Slovakia wants to meet all criteria for euro adoption in 2008. 
The central bank predicts EU-norm inflation rate to fall to 1.5 
percent at the end of 2007. 
- The central bank left the key two-week repo rate unchanged at 
4.75 percent for the fifth month in a row in February. Analysts 
expect the central bank to ease monetary policy this year. 
     
LINKS: 
- For further details on February inflation and other past data, 
Reuters 3000 Xtra users can click on the Slovak Statistics 
Office's website: 
    http://wwww.statistics.sk/webdata/english/index2_a.htm 
     
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