Slovak Sept CPI off record low, but euro on track

...stay on hold as the country 
appeared on track to meet a key euro entry test. 
    Inflation quickened to 1.7 percent on an annual basis in 
September, from a historical minimum of 1.2 percent booked in 
both August and July, the Statistics Office said. 
    On the month, consumer prices rose 0.3 percent in September 
after a 0.1 percent fall in August. The market had expected 
inflation of 0.1 percent on the month and 1.6 percent on the 
year. 
    Food prices, which have a strong weighting in the price 
basket, jumped 0.8 percent on the month in September, compared 
with a 1.0 percent drop in August. 
    "There is a clear rise in food prices, and we expect a 
further rise in the coming months," said Tatra Banka analyst 
Juraj Valachy. "But this rise should not endanger the Maastricht 
criterion (for inflation)." 
    The crown showed scant reaction to the data, trading at 
33.675 per euro  by 0910 GMT, about a quarter percent 
weaker on the session after a bout of selling late on Monday. 
    EU-norm inflation is the key gauge for the central bank 
(NBS), which aims to bring Slovakia into the euro zone in 2009. 
    Based on September's data, the euro entry test -- calculated 
as an average of the European Union's three countries with the 
lowest 12-month average inflation rates [ID:nBFA000526] plus 1.5 
percentage point -- was 2.57 percent. 
    Slovak inflation averaged 2.1 percent. 
    Slovakia met the inflation criterion for the first time ever 
in August despite its red-hot economy, which expanded by 9.4 
percent in the second quarter. 
     
    INFLATION SEEN IN CHECK 
    Both the NBS and analysts expect the country to keep 
inflation under the euro adoption threshold by a comfortable 
margin in the coming months. 
    "In our view, there is no significant risk for Slovakia of 
failing to meet the Maastricht criteria," said Piotr Matys, 
analyst at 4Cast in London. 
    "In terms of interest rates outlook, we expect the NBS to 
keep rates on hold in October," he said. 
    The NBS kept the key two-week repo rate at 4.25 percent for 
the fifth month running in September, waiting to see whether the 
euro zone benchmark, now at 4.0 percent, will rise further. 
    The central bank, which holds its regular monthly policy 
meeting on Oct. 30, will release its comment on September 
inflation later on Tuesday. 
 (For details on September inflation please click on 
[ID:nL16891453]) 
   
  Keywords: SLOVAKIA INFLATION/ 
    

[BRATISLAVA/Reuters/Finance.cz]