UPDATE 1-Slovak April inflation above forecast,seen slowing

...Wednesday, but the annual EU-norm rate still matched record lows 
and confirmed expectations of lower interest rates. 
    Consumer prices rose 0.3 percent on the month, according to 
EU-norm methodology, the Slovak Statistics Office said. The 
annual inflation rate was 2.0 percent, the same as the all-time 
low recorded in February, and slightly less than 2.1 percent 
price growth in March. 
    April's figures were above market forecasts for 0.1 percent 
monthly and 1.9 percent yearly inflation. The central bank also 
said April inflation rate was slightly above its expectations. 
    "The difference from market forecasts may have been caused 
by prices of drugs, and food prices also rose faster than 
expected," said Lucia Steklacova, a senior analyst at ING Bank 
Bratislava. 
    Food and non-alcoholic beverages, which have a heavy 
weighting in the consumer price basket, rose 1.0 percent 
month-on-month, after a 0.1 percent drop in March. 
    EU-norm inflation will be a yardstick for assessing 
Slovakia's readiness to enter the euro zone, which the country 
aims to achieve in 2009. 
    The central bank and analysts expect Slovakia to meet the 
inflation criterion for euro adoption, under which annual price 
growth must not be higher than 1.5 percentage points above the 
average of the three lowest inflation rates in the EU. 
    "There is no threat of failing to meet the Maastricht 
criterion," said Tatra Banka analyst Juraj Valachy. 
    Market watchers, including Valachy and ING's Steklacova, 
said there were no dangerous trends in demand-led inflation, and 
they saw room for more monetary policy easing in the third 
quarter of this year. 
     
    SLOWDOWN SEEN IN MAY 
    The central bank cut the key two-week repo rate by 25 basis 
points in March and April to 4.25 percent, after a rising crown 
helped to improve the inflation outlook.  
    "Annual dynamics of overall inflation should slow down in 
May, compared with April," the central bank said in a statement. 
    The slowdown will be due to smaller monthly rise in prices 
of food and petrol fuels, which had both showed "significant" 
jumps a year ago, the bank said. 
    April inflation data came one day after preliminary 
statistics showed 8.9 percent real gross domestic product growth 
in the first quarter, below the market forecast of 10.5 percent 
but still one of the fastest growth rates in the EU. 
    Central bank Governor Ivan Sramko said on Wednesday growth 
was not creating inflation pressures. 
    The monetary authority has also revised downwards its 
end-2007 inflation forecast to 1.3 percent from 1.5 percent. 
  
  Keywords: SLOVAKIA ECONOMY/INFLATION  
    

[BRATISLAVA/Reuters/Finance.cz]