INSTANT VIEW 2-Slovak May EU-norm CPI below forecasts

...inflation rate at record low of 1.5 percent, 
data from the Statistics Office showed on Thursday. 
     
KEY POINTS: 
SLOVAK EU-NORM INFLATION     MAY 07    MAY FORECAST 
  pct change mo/mo            0.0        +0.2 
  pct change yr/yr           +1.5        +1.7 
   
  (Details of May inflation data ............. [ID:nPRG000385]) 
 
- Food and non-alcoholic beverages, which have a strong 
weighting in the consumer price basket, rose by 0.5 percent 
month-on-month, after a 1.0 percent rise in April. 
- Housing, water, electricity, gas and other fuels prices, which 
pushed inflation up last year, were flat for the second month in 
a row in May. 
- Annual price growth in the housing category, which has the 
strongest weighting in the basket, was 2.6 percent for the third 
consecutive month. 
- Transportation prices rose by 0.3 percent month-on-month, 
after a 0.6 percent rise in April. 
 
    ANALYST COMMENT: 
    MICHAL MUSAK, ANALYST, SLOVENSKA SPORITELNA 
    "The data were slightly below expectations, but that had 
been already indicated by the local inflation statistics. Both 
local and HICP figures reflected slower growth of food items. 
    "The trend is favourable. Slovakia should fulfil the 
inflation criterion (for euro adoption) as early as in one 
month, or two months at the latest." 
 
    MARKET REACTION 
    The Slovak crown did not move on May inflation data, trading 
flat at 34.270 per euro  
 
BACKGROUND: 
- The central bank follows inflation calculated by the 
EU methodology as a part of Slovakia's plan to adopt the euro in 
2009. 
- The annual EU-norm inflation rate hit the lowest level ever in 
May. 
- Prices under the local methodology were flat on the month in 
May, putting the annual rate at 2.3 percent. 
- Slovakia aims to meet all criteria for euro adoption in 2008. 
The central bank predicts EU-norm inflation rate to fall to 1.3 
percent at the end of 2007. 
- The central bank cut its key two-week repo rate by 25 basis 
points in March and April, bringing it to current 4.25 percent, 
after the rising crown tightened monetary conditions and helped 
improve the inflation outlook. 
- The bank left the interest rates unchanged in May. 
     
LINKS: 
- For further details on May 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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