Slovak June PPI remains at lows, no rate impact seen

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BRATISLAVA, July 27 (Reuters) - Slovak annual producer price inflation remained at an 8-1/2 year low in June, landing slightly above market expectations, but the data were unlikely to change the path of monetary policy, analysts said on Friday.

Factory gate costs were up 1.3 percent on the year in June, matching the May rate, which was the lowest rate since January 1999, Statistics Office data showed.

On the month, prices jumped 0.3 percent, after May's dip of 0.1 percent. The market expected monthly inflation of 0.1 percent and a decrease in the annual rate to 1.2 percent.

"The figures are slightly higher than expected due to a rise in prices of wood, refinery products and also energy, which is quite volatile," said Tatra Banka analyst Juraj Valachy.

Wood prices booked the highest monthly rise of 3.1 percent within industrial products in June, while the refinery item was up 1.8 percent. Energy and raw material categories showed a rise of 0.2 and 1.3 percent, respectively.

Producer price growth has been subsiding this year, partly due to the government pressure on utilities to keep energy prices down ahead of euro adoption, planned for 2009.

Analysts said June's producer price figures showed no dramatic changes to alter the central bank's (NBS) view on interest rates, when its board meets on July 31.

"The figures are slightly higher than expected, but I do not think they will have any significant hawkish implications, because the PPI is a secondary indicator for the central bank," said Lucia Steklacova, senior economist at ING in Bratislava.

The market widely expects the NBS to keep the key two-week repo rate at 4.25 percent for the third month in a row next week, as the euro zone benchmark, now at 4.0 percent, is expected to match the Slovak level in September or October.

- For further details on June producer prices, Reuters 3000 Xtra users can click on the statistics office's website:

http://www.statistics.sk/webdata/english/index2_a.htm

Keywords: SLOVAKIA PPI/