By Martin Dokoupil
BRATISLAVA, Nov 12 (Reuters) - Slovak annual inflation unexpectedly surged to a 10-month high in October on rising food costs, but analysts said on Monday faster price growth should not endanger fulfilment of euro adoption conditions.
Consumer prices rose 3.3 percent on an annual basis in October, the highest level since December 2006, from 2.8 percent in the previous month. The market had forecast October inflation rate, calculated by local standards, at 2.8 percent.
On the month, inflation was 0.6 percent, up from 0.2 percent in September, the Slovak Statistics Office said.
"This figure was influenced by several factors, with food price growth as the dominant one," said Juraj Valachy, analyst at Tatra Banka in Bratislava.
Prices of food and non-alcoholic beverages rose 2.6 percent on the month in October, after a 1.0 percent rise in September.
The crown eased slightly after the data, but then gained ground quickly and reached an eight-month high of 32.940 per euro <EURSKK=>. It closed at 32.990 on Friday.
Keeping inflation under control is a key challenge for Slovakia in the run-up to planned euro zone entry in 2009.
Analysts said faster inflation would also be reflected in EU-harmonised data, due on Nov. 15, which is the key price growth gauge for the central bank (NBS).
They said, however, the spike was not likely to endanger Slovakia's euro ambitions as rising prices in the European Union were also pushing the reference value up.
"We are not significantly concerned that Slovakia could fail to meet the Maastricht criteria since food prices fuel inflation not only in Slovakia but in other countries in the region and the euro zone, which makes us modestly comfortable about the spike in Slovakia," said 4Cast analyst Piotr Matys.
"We do not expect the NBS to change its monetary policy on the back of the recent spike in CPI," he said.
Slovakia's 12-month average, the key yardstick in the euro adoption test, fell below the reference threshold for the first time ever in August.
The NBS kept its key two-week repo rate unchanged at 4.25 percent for the sixth month in a row in October as the strong crown tightened monetary conditions.
The central bank has also raised its inflation forecasts, saying it was likely to overshoot the 2.0 percent target for EU-norm inflation in 2008.
The European Commission said last week sustainability of inflation should be carefully considered when Slovakia's readiness for the euro is assessed next spring.
(For details on October inflation please click on [])
(Additional reporting by Peter Laca)
((martin.dokoupil@reuters.com; +421 2 5341 8402; dEditing by Gerrard Raven; Reuters Messaging: martin.dokoupil.reuters.com@reuters.net))
Keywords: SLOVAKIA ECONOMY/INFLATION
