UPDATE 1-Slovak June inflation matches lows, rates seen flat

...for the second month running in 
June, data showed on Monday, but analysts said a favourable 
outlook will not trigger interest rate cuts. 
    EU-norm inflation (HICP), which will be the prices yardstick 
for assessing Slovakia's readiness to adopt the euro in 2009, 
was 0.1 percent on a monthly basis in June, the Slovak 
Statistics Office said. 
    The annual inflation rate was 1.5 percent, matching the 
record low level in May and a touch below the market forecast of 
a 1.6 percent rise. 
    Among the most heavily weighted categories, food prices and 
non-alcoholic beverages fell 0.4 percent from May, helping to 
offset a 0.1 percent monthly rise in housing prices and a 0.3 
percent increase in transport costs. 
    "All in all, the breakdown is positive, with (the) outlook 
for HICP remaining positive as a strong crown will help to 
offset potential offshore risks to HICP, mainly higher oil 
prices," said Piotr Matys, a 4Cast analyst in London. 
    The central bank (NBS) said the figures were below its 
expectations, adding that inflation may decelerate slightly in 
July, mainly on the back of services and industrial goods' 
prices. 
    The NBS sees EU-norm inflation at 1.3 percent at the end of 
2007. It forecasts an average inflation rate of around 1.5 
percent in spring 2008 when the European Union will assess 
Slovakia's readiness to adopt the euro. 
    The bank expects to meet the price stability criterion, 
defined as an inflation rate of no more than 1.5 percentage 
points above the average of the three lowest inflation rates in 
the EU, with plenty to spare. 
    But a recent European Central Bank memo said Slovakia should 
not count on automatic fulfilment of the inflation condition, 
even if its inflation rate is below the reference value as it 
will have to prove that low price growth is sustainable. 
    The NBS 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 strong crown helped to keep shop prices under control. 
    But it left rates unchanged in June and many analysts see no 
more monetary policy easing this year despite benign inflation. 
    "We maintain our view that inflation structure is not 
showing demand-led pressures," said Lucia Steklacova, senior 
analyst at ING Bank in Bratislava. "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 Maastricht criteria." 
  (Additional reporting by Martin Dokoupil) 
  
  Keywords: SLOVAKIA ECONOMY/INFLATION