Slovak Nov EU-norm inflation higher than expected

    By Martin Dokoupil 
    Slovak EU-harmonised 
inflation was higher than expected in November, at 3.7 percent 
year on year after a one year low of 3.1 percent in October, but 
analysts said the central bank is set to keep interest rates 
unchanged next week as the crown has firmed sharply and the 
outlook for inflation has improved. 
    Over the month, prices rose 0.5 percent whereas they were 
unchanged in October, Statistics Office data showed on Friday. 
    The market had expected November monthly inflation of 0.3 
percent and 3.4 percent year-on-year. 
    "The biggest factor behind the rise was the increase in 
natural gas prices and surprisingly high growth in food prices. 
On the other hand, lower fuel prices were taming the rise," said 
Tatra Banka analyst Juraj Valachy. 
    "The figure is in line with the already released national 
index," said Valachy. 
    Earlier this week, data showed inflation calculated under 
the local methodology stood at 0.6 percent on the month in 
November and 4.3 percent on an annual basis. 
    Hikes to regulated energy prices boosted inflation to a 5.0 
percent peak in summer. EU-norm inflation is the yardstick of 
price growth for the central bank. 
    The central bank (NBS) has hiked its key rate by 175 basis 
points to 4.75 percent this year to curb inflation, a key 
challenge for Slovakia's plan to adopt the euro in 2009. 
    But analysts said no change in the central bank's policy 
settings was likely on its Dec. 20 board meeting, after the 
crown's rally tightened monetary conditions. 
    The inflation outlook has also improved as the energy market 
regulator slashed household natural gas prices and kept 
electricity costs flat next year. 
    "The key factor to keep interest rates unchanged should be 
the currency's rally, which has tightened monetary conditions 
and contributed to a positive inflation outlook for the next 
year," said Lucia Steklacova, senior analyst at ING in 
Bratislava. 
    The crown hit a record high of 34.620 per euro on Wednesday, 
but retreated to weaker levels after the central bank said its 
rise was too fast and not in line with fundamentals. 
    The crown showed no reaction to the release, trading at 
34.790 per euro , compared with Thursday's close of 
34.770. It has gained 7.7 percent over the past three months, 
buoyed by a bullish regional mood and Slovakia's record economic 
growth. 
   (Additional reporting by Martin Santa) 
  ((Editing by Ian Jones; Reuters Messaging: 
martin.dokoupil.reuters.com@reuters.net; +421 5341 8402)) 
  Keywords: SLOVAKIA ECONOMY/INFLATION 
    

[BRATISLAVA/Reuters/Finance.cz]