(Adds comments from news conference)
By Peter Laca
BRATISLAVA, June 24 (Reuters) - The Slovak central bank held
its main interest rates steady for the 14th consecutive month on
Tuesday, in line with market expectations, as it waits to align
its borrowing costs with the euro zone before euro adoption.
The decision, made at the monthly monetary policy meeting,
kept the main two-week repo rate at 4.25 percent, preserving a
25 basis point premium over the euro zone benchmark rate.
It came after a surprising Hungarian vote to keep rates flat
on Monday rather than raising them, and ahead of an expected
hike in Poland on Wednesday as the region battles with rising
enegy and food costs.
The June monetary policy meeting was held only two weeks
before Slovakia and European Union authorities announce the
conversion rate at which the central European country will swap
its crown currency for the euro next year.
"Based on the latest economic data we can state that current
and expected macroeconomic development is for now in line with
NBS (central bank) expectations," central bank Governor Ivan
Sramko told a news conference.
Sramko said rising labour costs would be an inflation risk
if they continued to outpace productivity growth but the firming
crown was tightening monetary conditions.
He said data indicated continued growth growth in exports
while household spending was expected to slow down in the second
quarter.
Slovakia will have to bring its rates to the euro zone level
following the decision by EU leaders to let the country become
the 16th member of the currency bloc next January.
Analysts say, however, that signs of inflation pressures
stemming from strong consumer spending in Slovakia's fast
growing economy prevent any near term monetary policy easing.
Market watchers said the NBS was likely to wait to see
whether the European Central Bank (ECB) raises its borrowing
costs, which would bring them to parity with Slovak rates.
"With risks of an ECB hike in July, in our view it would not
make much sense for the NBS to move rates now," said Eduard
Hagara, an ING Bank analyst in Bratislava.
Slovak consumer price growth has accelerated in the past
nine months, driven mainly by the global rise in food and energy
costs. The NBS says the main inflationary factors are outside
the influence of its monetary policy.
Inflation, measured by EU methodology, hit a 20-month high
of 4.0 percent in May, and analysts expected it to peak at
around 4.4 percent in the summer.
Sramko said in an interview with Czech television that the
central bank estimates showed inflation was now around its
ceiling and "should gradually start falling due to base effects
and due to other factors".
Slovakia's efforts to keep price growth under control have
been helped by the firming currency in recent months as
investors bet the country would seek a strong conversion rate
for euro adoption to tame future inflation pressures.
The crown's peg to the euro within the European Union's
ERM-2 currency grid was revalued by 15 percent on May 28,
following rapid appreciation in the crown.
The market widely expects the actual switchover rate to be
set at, or near, the ERM-2 central level of 30.1260 crowns per
euro <EURSKK=>.
(Editing by Gerrard Raven)
