INTERVIEW-Slovak cbanker says rate hikes may be on cards

By Martin Dokoupil

BRATISLAVA, Nov 16 (Reuters) - Slovakia's record third quarter growth was a surprise and further hikes in interest rates may be on the cards if detailed data show signs of a rise in consumption, a central bank board member said on Thursday.

Ludovit Odor, a board member and research director at the bank, told Reuters in an interview that a 9.8 percent rise in third quarter GDP seemed to have been driven by export-oriented inventories rather than consumption demand.

But, he added, if signs of consumption rising too fast are seen, the central bank would tightened policy further after hikes totalling 175 basis points so far this year.

"If consumption was growing significantly I can imagine a further restriction of monetary policy beyond the current level," Odor said.

The Statistical Office published its preliminary flash GDP estimate earlier this week, but gave no details other than the headline figure. It will release final third quarter GDP data on Dec. 7.

The central bank has been fighting to push down inflation, seen as the biggest challenge for Slovakia's plan to adopt the euro in 2009.

Odor said the rising crown has lent a helping hand to the central bank and could ease the need for a tightening that analysts predict for a Nov. 28 policy meeting.

He added that the crown, which hit a record high of 35.690 against the euro on Wednesday, was valued in line with current fundamentals even though it is trading 7.6 percent above its central parity in the exchange rate mechanism 2 (ERM 2), the precursor to the euro.

"If we look at the current economic growth and export figures, there are no signals that there is a significant loss of competitiveness of the Slovak economy (due to the crown's rise," Odor said.

"We think there is nothing extraordinary happening when we look at the real exchange rate developments, but we obviously monitor the situation and if significant volatility happened, we would certainly consider using monetary policy tools," he said.

The crown has outperformed regional currencies this year, fuelled by a bullish emerging market mood, Slovakia's prospects of adopting the euro in 2009 and expectations of a lower current account deficit.

Odor also said he personally thought the inflation outlook has improved recently with more favourable oil prices in world markets and a more restrictive monetary policy.

"It is key for us to meet Maastricht, but I see a chance that we will get closer to our (2007 inflation) target than was shown in our last forecast if positive (inflation) risks materialise," Odor said.

"One of the more important positive risks is the price of (natural) gas where our forecast counts on a 5 percent rise from January 1, while current estimates speak more of a possible decline," he said.

Annual inflation slowed to a one-year low of 3.1 percent by EU standards in October, coming below central bank expectations.

Last month, the NBS cut its end-2007 inflation forecast to 2.6 percent, from 2.8 percent. The 2007 target is 2.0 percent.

The NBS board was unanimous last month in leaving the key repo rate at 4.75 percent, after lifting it by 25 basis points in September. The euro zone benchmark stands at 3.25 percent. (For more Odor comments please click on [ID:nL16788579])

((Editing by Gerrard Raven; Reuters Messaging: martin.dokoupil.reuters.com@reuters.net; +421 5341 8402))

Keywords: ECONOMY SLOVAKIA CBANKER