INSTANT VIEW 2-Slovak June inflation matches record lows

...inflation rate at 1.5 percent, unchanged from 
May, the Slovak Statistics Office said on Monday. 
 
KEY POINTS: 
SLOVAK EU-NORM INFLATION    JUNE 07    JUNE 07 FORECAST 
  pct change mo/mo           +0.1        +0.1 
  pct change yr/yr           +1.5        +1.6 
   
  (Details of May inflation data ............. [ID:nPRG000419]) 
 
- Food and non-alcoholic beverages, which have a strong 
weighting in the consumer price basket, fall by 0.4 percent 
month-on-month, after a 0.5 percent rise in May. 
- Housing, water, electricity, gas and other fuels prices, which 
pushed inflation up last year, rose by 0.1 percent on the month 
in June, after being flat in May. 
- Annual price growth in the housing category, which has the 
strongest weighting in the basket, was 2.7 percent in June, 
after a 2.6 percent growth in May. 
- Transportation prices rose by 0.3 percent month-on-month, 
matching the growth rate from May. 
    
ANALYST COMMENT: 
    LUCIA STEKLACOVA, SENIOR ANALYST, ING BANK, BRATISLAVA 
    "We maintain our view that the inflation structure is not 
showing demand-led pressures. But we expect the central bank to 
take a cautious stance and not change interest rates by the end 
of the year because of next year's assessment of the fulfilment 
of the Maastricht criteria." 
 
MARKET REACTION: 
    The Slovak crown was at 33.180 to the euro  as of 
0710 GMT in light activity, only slightly changed from 33.195 
per euro before the inflation data release. 
 
BACKGROUND: 
- The central bank follows inflation calculated by the 
EU methodology as a part of Slovakia's plan to adopt the euro in 
2009. 
- June annual inflation rate of 1.5 percent matched the record 
low level seen in May. 
- Prices under the local methodology rose by 0.3 percent on the 
month in May, putting the annual rate at 2.5 percent. 
- Slovakia aims to meet all criteria for euro adoption in 2008. 
The central bank predicts the 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 the 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 June. 
- Many analysts predict no further monetary policy easing, 
saying the central bank will want to meet the inflation 
condition for euro zone entry with as wide a buffer as possible. 
     
LINKS: 
- For further details on June 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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