UPDATE 2-Slovak cbank keeps rates flat after euro verdict

                                
 (Adds analyst comment, regional view)
                                
 By Peter Laca
                                
 BRATISLAVA, May 27 (Reuters) - The Slovak central bank kept
its key interest rates on hold on Tuesday, as expected, to keep
borrowing costs stable for the 13th consecutive month as the
country moves closer towards euro adoption next year.
                                
 The decision, made at the first policy meeting since the
European Commission judged Slovakia fit to adopt the euro in
2009, kept the main two-week repo rate at 4.25 percent, a 25
basis point premium over the euro zone benchmark.
                                
 Of the biggest countries to join the European Union this
decade, only the Czech Republic has looser monetary policy, with
its key rate at 3.75 percent.
                                
 Hungary raised its benchmark by 25 basis points to 8.5
percent on Monday, while some policy makers in and Warsaw and
Prague are contemplating higher borrowing costs to stave off a
surge in inflation.
                                
 The National Bank of Slovakia (NBS) said board members would
comment on the rate decision at a news conference scheduled for
1 p.m. (1100 GMT).
                                
 The Slovak central bank has held rates steady for just over
a year despite accelerating price growth, saying inflation has
been fuelled by factors outside its influence -- mainly the
global increase in the costs of food and energy.
                                
 Providing the European Central Bank (ECB) does not hike
rates, the NBS will have to ease its monetary policy to fall in
step with the single currency area as part of euro adoption.
                                
 But analysts said signs of demand-led pressures in
Slovakia's fast growing economy would probably prevent early
easing.
                                
 UniCredit Bank analysts in Bratislava said slightly
higher-than-expected GDP growth in the first quarter and a
strong annual rise in retails sales meant the NBS might want to
keep monetary conditions more restrictive.
                                
 "Even despite monetary conditions tightening through the
exchange rate channel (crown strengthening), it is possible that
the NBS will proceed with harmonisation of key interest rates as
late as at the end of the year," UniCredit Bank said in a note.
                                
 Slovak inflation, measured by EU methodology, reached a
16-month high of 3.7 percent in April. Market watchers see a
further acceleration to around 4 percent in the summer, compared
with the NBS's forecast of 2.8 percent for the end of this year.
                                
 
                                
 STRONG CROWN
                                
 Slovakia's effort to tame inflation has been helped by its
firming currency, which has reached repeated record highs in
recent weeks as investors bet on the country seeking a strong
switchover rate for swapping crowns for euros.
                                
 The Slovak unit was little changed after the interest rate
decision, trading at 31.090 per euro on Tuesday.
                                
 The Slovak government will negotiate with EU authorities
over the conversion rate for euro zone entry in the coming
weeks, and Prime Minister Robert Fico has said a strong exchange
rate was needed to counter inflation risks.
                                
The market widely believes Slovakia will revalue the crown's
peg to the single currency within the Exchange Rate Mechanism
ERM-2. The unit now trades 12.3 percent above the central parity
rate of 35.4424 crowns per euro.
 (Reporting by Peter Laca; Editing by Michael Winfrey)