Slovak June CPI touch above fcasts,rates seen flat

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BRATISLAVA, July 12 (Reuters) - Slovak inflation rose slightly above market expectations in June, but analysts said the nature of the price pressures suggested rates could stay on hold in coming months.

The Slovak Statistics Office said annual consumer price growth reached 2.5 percent by local standards in June, from 2.3 percent in the previous month. Monthly inflation was 0.3 percent, after staying flat in May.

Analysts had expected inflation of 2.4 percent on the year and 0.2 percent on a monthly basis.

"The biggest surprise was on the side of imputed rents, but this is not included in the EU-norm inflation (measure)," said Eduard Hagara, analyst at ING Bank in Bratislava.

The central bank (NBS) is watching the inflation measure calculated using EU methodology, due out on July 16, as part of Slovakia's plan to adopt the euro in January 2009.

Inflation is the main potential obstacle to euro entry.

Slovakia expects to easily meet the entry criterion next year when its progress is assessed, but an ECB memo obtained by Reuters last month said there was a risk that the fall in Slovak price growth may only be temporary.

Inflation accelerated in 2006 due to hikes in natural gas and heating prices for households, but price growth slowed this year partly due to government pressure on utilities.

Analysts said the NBS was likely to hold the key two-week repo rate at 4.25 percent this year, as the euro zone benchmark, now at 4.0 percent, is expected to rise.

"The NBS doesn't have any room for softer monetary conditions in the near-term. The question is how the NBS plays this," said Martin Blum, economist at UniCredit Markets & Investment Banking in Vienna.

"We'd not position on it, but at the margin today's data leaves us feeling that despite still soft(ish) trade data, potentially the NBS will become less resistant to euro/Slovak crown downside," he said.

The Slovak central bank repeatedly intervened to slow crown appreciation earlier this year.

A separate release showed Slovak trade deficit widened to an unexpectedly large 3.5 billion crowns ($144.3 million) in May, from a revised gap of 1.0 billion in the previous month. The market had expected a shortfall of 1.6 billion.

The crown has gained 3.5 percent against the euro over the past month, touching a 13-week high of 33.300 on Wednesday .

(Additional reporting by Martin Santa and Marek Petrus in Prague)

($1=24.25 Slovak Crown)

Keywords: SLOVAKIA CPI/