(Adds details, analyst quotes)
By Luiza Ilie and Marius Zaharia
BUCHAREST, Oct 10 (Reuters) - Inflation in Romania slowed
less than forecast in September and hit an almost four-year high
in Slovakia, and analysts said it would still take time to
further loosen the clamps on monetary policy.
Romania's annual inflation rate slowed to 7.3 percent, from
8 percent in August, and analysts said the central bank would
hold rates steady for the rest of the year. Prices rose 0.4
percent on the month, led by a 0.3 percent rise in food.
Inflation in Slovakia, which is preparing to join the euro
zone in January, surprised the market with the annual inflation
rate surging to 5.4 percent, the highest since December 2004. It
was 0.7 when compared with August.
Analysts said inflationary pressure remained in Romania,
stemming from high domestic consumption and a steep depreciation
of the leu currency in recent weeks.
At the same time, rising concerns over a slowdown in the
economy next year as the global credit crunch limits investment
and cuts consumption-boosting loans left less room for a hike,
they said.
"I see the central bank keeping rates flat at its next
meeting. Given strong inflationary pressures and the
depreciation of the leu there is a need for monetary policy
restrictiveness," said Melania Hancila, research analyst at BCR.
Analysts polled by Reuters had forecast annual inflation of
7.2 percent and 0.3 percent for the month-on-month figure.
PRICE GROWTH SEEN FALLING
In Slovakia, analysts widely expect inflation to decelerate
near the end of the year, although they expect the impact of a
higher excise tax on tobacco products to show up before then.
The small, export-driven country will have to cut rates from
4.25 percent to re-align them with the European Central Bank's
before joining the single currency bloc after the euro zone's
monetary authority cut rates by 50 basis points this week.
"Slovakia will wait with monetary policy easing due to
inflation and money market rates in the euro zone, which
markedly differ from key interest rates," said Citibank analyst
Jaromir Sindel.
The data also followed figures from the Czech Republic on
Wednesday showing an uptick in annual inflation to 6.6 percent.
For Romania, the September result was the second sharp
decline its inflation rate in as many months, mainly due to a
favourable base effect. It is expected to decline to above 6
percent in December, still well outside the central bank's
target range of 2.8-4.8 percent.
The central bank countered a spike in inflation this year
due to consumption and high energy and food prices by raising
interest rates by 325 basis points to 10.25 percent in nine
months, giving its overheated economy the highest interest rates
in the European Union.
However, some economists still see a case for tightening due
to strong fiscal deteriorarion through overblown social spending
ahead of a parliamentary election on Nov. 30.
"There is renewed weakness on currency which is of concern
... because of the close link between the currency and inflation
in Romania. And there are still demand pressures which
overshadow macroeconomic stability," said Citigroup analysts
Ilker Domac.
(Additional reporting by Peter Laca in Slovakia; Editing by
Michael Winfrey)
