INSTANT VIEW 3-Slovak July CPI slightly below forecasts

...Friday. 
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KEY POINTS: 
SLOVAK HEADLINE CPI     JULY 07    JULY 07 FCASTS 
  pct change mo/mo       +0.0          +0.1 
  pct change yr/yr       +2.3          +2.4 
     
(for full table pls click ............ [ID:nPRG000451]) 
     
- July core inflation rate, which excludes the impact of changes 
to state-regulated prices and excise taxes, is -0.1 percent 
month-on-month, compared with the forecast of a 0.1 percent 
rise. 
- Housing, water, electricity, gas and other fuels are flat on 
the month, after a 0.7 percent growth in June. 
- Prices of food and non-alcoholic beverages down by 0.6 percent 
on the month in July, after 0.1 percent drop in June. 
- Transportation prices, influenced mainly by oil costs, rise by 
0.2 percent on the month in July, after 0.4 percent growth in 
June. 
 
COMMENTARY: 
    MARIA VALACHYOVA, SENIOR ANALYST, SLOVENSKA SPORITELNA 
    "CPI was better than expected mainly because of food prices, 
which could also positively influence HICP (EU-norm inflation) 
as they have strong weighting there as well. 
    "The data confirmed the trend of a favourable inflation 
outlook. 
    "The central bank is unlikely to lower interest rates as 
there are still inflation risks. Also, the ECB looks likely to 
raise rates as early as September, and Slovak rates should 
converge with the euro zone." 
     
    EDUARD HAGARA, ANALYST, ING, BRATISLAVA 
    "CPI was better than expected, mainly due to a monthly 
decrease in food prices. The inflation structure brought no 
surprises, and it is not showing demand-led pressures. 
    "The data should not have an impact on the monetary policy 
scenario of flat interest rates by the end of this year. We 
expect a 25 basis point hike in the first quarter of next year." 
     
MARKET REACTION: 
-The crown weakens to a two-week low 33.570 per euro from 33.550 
before the data, with traders saying the driver was negative 
global sentiment on emerging markets and worse-than-expected 
foreign trade data for June. The unit closed at 33.495 on 
Thursday. 
     
BACKGROUND: 
- Inflation data were calculated according to domestic 
methodology. 
- The central bank sets its goals according to inflation 
calculated under the EU-harmonised consumer price index as part 
of Slovakia's goal to adopt the euro in 2009. 
- The Statistics Office will release EU-norm inflation data for 
July on Aug 16. 
- The market followed local inflation data in the past because 
of their earlier release, but analysts started to pay more 
attention to statistics by EU-methodology after the two figures 
began to show wider differences earlier in 2007. 
- Slovak inflation accelerated in 2005 and 2006 due to hikes in 
natural gas and heating prices for households. 
- But price growth slowed down at the start of 2007, partly due 
to the government pressure on utilities. 
- The central bank (NBS) held interest rates steady in July. It 
last cut the key two-week repo rate by 25 basis points to 4.25 
percent in April after a stronger crown helped improve the 
inflation outlook. 
     
LINKS: 
- For further details on July 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 
 
- For LIVE Slovak economic data releases, click on...... 
- Schedule of upcoming indicator releases............ 
- Summary of short-term economic data forecasts...... 
- Stories on Slovak currency moves........................[SKK/] 
- Slovak speed money guide .............................. 
- Slovak benchmark state bond prices ................. 
- Slovak forward money market rates .................... 
 

[BRATISLAVA/Reuters/Finance.cz]