Slovak EU-norm CPI at yr low, rates may still rise

    BRATISLAVA, Nov 16 (Reuters) - Slovak inflation hit a 
12-month low in October as utility price hikes from last year 
dropped out of statistics released on Thursday, but analysts 
still saw chances of higher interest rates. 
    The Statistics Office said consumer prices were flat 
month-on-month in October, putting the annual inflation rate at 
3.1 percent, according to the European Union methodology. 
    "The main factor was the base effect, when the impact of 
last year's rise in energy prices disappeared. The number was 
slightly better than expected," said Slovenska Sporitelna 
analyst Michal Musak. 
    Analysts polled by Reuters had forecast a 0.1 percent 
monthly rise in prices, for a 3.3 percent annual inflation rate, 
compared with 4.5 percent in September. 
    The central bank said October inflation rate was below its 
forecasts, but it did not comment on the possible monetary 
policy implications of the data. 
    Slovakia needs to curb inflation further by spring 2008 to 
meet conditions for adopting the euro as planned in 2009. 
    The main risks for consumer prices stem from uncertainty 
over energy costs, and from fast economic growth. 
    Data showed on Wednesday real gross domestic product rose by 
9.8 percent in the third quarter, Slovakia's fastest quarterly 
growth ever. 
    Central Bank chief Ivan Sramko said economic growth appeared 
to have been driven mainly by non-inflationary foreign demand, 
but he declined to say what the high GDP figure may mean for the 
interest rate settings. 
    The central bank has raised its key two-week repo rate by 
175 basis points in four steps since February, putting it at 
4.75 percent. Analysts said more policy tightening may be needed 
despite the fall in inflation. 
    "There is still a chance for a 25 basis points rate hike by 
the end of the year, but the central bank may wait for the 
detailed GDP structure at the beginning of December," said ING 
Bank senior economist Lucia Steklacova. 
  ((Reporting by Martin Santa, Editing by Gerrard Raven; Reuters 
Messaging: martin.santa.reuters.com@reuters.net; +421 2 5341 
8402)) 
  Keywords: ECONOMY SLOVAKIA INFLATION