POLL-Slovak rates seen up again in Oct, CPI slows

By Martin Santa

BRATISLAVA, Oct 6 (Reuters) - Slovak inflation probably slowed in September, but the central bank (NBS) will lift rates further in October to try to keep the EU member on target for euro adoption in 2009, a Reuters survey showed on Thursday.

The survey of 10 analysts showed a median forecast of 4.7 percent for annual EU-norm inflation in September, decelerating from 5.0 percent in August. Inflation data are due to be released on Oct. 11.

"Looking ahead, inflation should gradually decline on favourable base effects as increases in regulated energy prices will be lower than year ago," said Slovenska Sporitelna analyst Maria Valachyova.

The State Regulator approved a 4.26 percent hike in prices of gas, effective from November, compared with a 20.3 percent hike approved last year in August.

Inflation has been building mainly due to rising utility prices, pushed up by global oil costs and strong economic growth.

The central bank has tightened monetary conditions by 175 basis points since February in an attempt to stop persisting inflation pressures from spilling over into the wider economy.

The bank has said more tightening is needed due to inflation risks stemming from wage growth, with analysts adding the 2007 state budget outline would also shape the central bank's outlook.

Six out of 10 analysts predicted a 25 basis point rise in the main two-week repo rate, currently at 4.75 percent, one expected a 50 b.p. hike and three forecast no change.

"The central bank's options are still open, all depends on the state budget," said ING Bank senior analyst Lucia Steklacova.

The government of Prime Minister Robert Fico is in the final phase of 2007 state budget preparations, with the overall fiscal gap seen at 3.0 percent.

But analysts are concerned Fico's pledge to boost welfare spending will fuel inflation and widen the overall fiscal gap.

((For table with Reuters survey of forecast, please click on [ID:nL06854086])) ((Reporting by Martin Santa, Editing by Gerrard Raven; Reuters Messaging:

martin.santa.reuters.com@reuters.net; +421-2-5341-8402))

Keywords: gr ECONOMY SLOVAKIA SURVEY