Slovak March CPI benign, opens room for rate cut

...favourable inflation outlook opened room for 
lower interest rates in the next few months. 
    The Statistics Office said annual inflation was 2.7 percent 
in March, unchanged from the previous month and a touch below 
market expectations for a 2.8 percent rise, according to figures 
calculated using a national measure. 
    Data calculated using the EU measure -- targeted by the 
central bank (NBS) as part of Slovakia's plans to adopt the euro 
in 2009 -- is due on April 16. 
    "The data confirm the picture of favourable inflation 
outlook and that demand-led inflation pressures are not very 
strong," said Maria Valachyova, senior analyst at Slovenska 
Sporitelna. 
    Inflation has slowed to its lowest levels since September 
2005 as last year's jumps in energy costs faded away. 
    State-regulated energy prices remained flat or fell from 
January, partly due to pressure from the leftist government on 
utilities. 
    Most analysts expect the NBS to cut rates again in the 
second quarter of the year, depending on the strength of the 
crown. 
    "It cannot be ruled out that (the NBS') inflation prognosis 
will be better than in January due to a stronger crown," said 
CSOB bank analyst Silvia Cechovicova. "In this case, a change 
(rate cut) could come at the end of April." 
    The central bank, which trimmed its key rate by 25 basis 
points to 4.50 percent last month, will release its updated 
economic forecasts at the monthly policy meeting on April 27. 
    The crown hit a record high of 32.710 per euro after its 
parity in the ERM-2 exchange rate mechanism was revalued in 
March. But central bank intervention combined with liquidity 
injections pushed it to weaker levels. 
    At 0835 GMT, the crown traded at 33.435 per euro , 
compared with 33.380 before the data release. 
   (For further details on March inflation please click on 
[ID:nL12620840])