PREVIEW-Slovak March inflation seen up from record lows

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WHEN: April 16, April 27

*Inflation seen up from record lows, strong crown may give room for another interest rate cut in April

By Martin Santa

BRATISLAVA, April 4 (Reuters) - Slovakia's March inflation is expected to have edged up from February's record low and the strength of the crown currency has boosted chances of a central bank interest rate cut this month, a Reuters poll showed on Wednesday.

The median forecast of 10 analysts showed annual EU-norm inflation accelerated to 2.1 percent in March, from a record low of 2.0 percent the previous month.

Analysts predict monthly consumer price growth of 0.1 percent in March, unchanged from February, with higher fuel prices as the key driver. However, they said the outlook remains bright as the country looks to adopt the euro in 2009.

"We still expect the EU-norm inflation to move toward 2.0 percent by the year-end," said Lucia Steklacova, senior analyst at ING Bank Bratislava.

The central bank (NBS), which targets EU-norm inflation, currently sees the end-2007 inflation rate at 1.5 percent, but will release a new prediction at its policy meeting on April 27.

Slovak price growth has slowed this year as the impact of last year's rise in energy costs fades. The state regulated utility prices remained flat or fell from January.

Six out of 10 analysts predicted the NBS would stay put in April due to external inflation risks, while the rest said the crown's rise opened room for a 25 basis points rate cut.

"(Wednesday's) intervention strengthens the argument in favour of a cut in April," 4Cast analyst Piotr Matys said.

"But, in my opinion, the NBS will opt to wait as there is a risk that oil prices, key to the inflation outlook, might go even higher if geopolitical tensions increase," he said.

The NBS intervened against the crown earlier on Wednesday, for the third time this year, after its last week's rate cut and liquidity injections failed to curb the unit's strength. The bank also pledged to continue correcting unwanted crown swings.

"Intervention can deliver (only) a temporary benefit," said Miroslav Plojhar, chief economist at Citibank Prague.

"Inflation outlook is bright, there is a firming pressure on the crown and market interest rates are lower than the official repo rate, so why to hold it (the key rate) there," he said.

The NBS cut the key two-week repo rate by 25 basis points to 4.50 percent last week, but improved regional mood pushed the crown 1.7 percent stronger to a two-week high of 33.100 per euro on Wednesday. The unit traded at 33.460 at 1410 GMT.

(For accompanying table please click on [ID:nL04456338])

Keywords: SLOVAKIA ECONOMY/PREVIEW