Slovak March PPI below forecast, rates seen lower

...confirming a moderate inflation outlook and 
market expectations for a further interest rate cut. 
    Producer prices were flat month-on-month in March, putting 
the annual inflation rate for factory gate costs (PPI) at 3.1 
percent, the Slovak Statistics Office said. 
    Analysts had forecast producer prices to have risen by 0.3 
percent on the month for an annual rate of 3.5 percent. 
    "The overall figure is lower (than expected) because energy 
costs have stronger weighting than refinery products," said 
Lucia Steklacova, a senior analyst at ING Bank Bratislava. 
    Prices of refinery goods jumped by 16.7 percent on the month 
in March, after an 11.8 percent drop in February. Energy prices 
fell by 0.7 percent month-on-month in March, after a 4.4 percent 
rise the previous month. 
    Steklacova, who had predicted a 2.5 percent rise in refinery 
prices in March, said the surprising increase was most likely a 
one-off. 
    Slovak producer price inflation slowed at the start of 2007 
after the impact of last year's jump in energy prices faded. 
    Slowing PPI has coincided with falling consumer inflation  
this year. Slovakia needs to keep the latter contained up to  
spring 2008 to fulfil its goal of adopting the euro in 2009. 
    The central bank cut the main two-week interest rate by 25 
basis points in March and April, as a rising crown effectively 
tightened monetary conditions and benign producer prices 
confirmed a favourable inflation outlook. 
    "We think that the NBS is going to cut its key rate 
further," said Anne-Francoise Bluher, analyst at Komercni Banka. 
"We expect for the time being another 25 (basis points cut) in 
the third quarter, and another 25 in the fourth quarter due to 
strong crown." 
  (Full table of March inflation data ........ [ID:nPRG000334])