RPT-UPDATE 2-Slovakia follows ECB, cuts repo rate 50 bp

                                
 (Repeats story from Tuesday)
                                
 By Peter Laca
                                
 BRATISLAVA, Nov 11 (Reuters) - Slovakia's central bank cut
its main two-week repo rate by 50 basis points to 3.25 percent
on Tuesday in an unexpected move to bring it back in line with
euro zone borrowing rates before it adopts the euro in January.
                                
 The Slovak cut followed a 50 basis point reduction in the
ECB's benchmark rate made last week amid easing inflation
pressures and threats of the first recession in the single
currency area in its 10 year history.
                                
 The National Bank of Slovakia (NBS) said its rate cut was
intended to smooth transition to the euro, while favourable
commodity prices and outlook for weaker domestic and foreign
demand gave room to relax policy without boosting consumer price
growth.
                                
 "This decision will simplify some procedures related to euro
adoption, allow gradual transition to the common currency in
terms of interest rates and will also help to stabilise money
market conditions," the NBS said in a statement.
                                
 The NBS changed the rates at a regular weekly meeting of its
policy-making board which was not scheduled to make a decision
on monetary policy. The bank normally discusses monetary issues
and decides on rates at a meeting at the end of each month.
                                
 Slovakia, the first of the four ex-communist European Union
members in central Europe to adopt the euro, has not felt a
direct impact of the global financial crisis on its banks.
                                
 But like its regional peers Hungary, Czech Republic and
Poland, Slovakia depends heavily on exports to the West and
weaker demand for its goods will cut economic growth this year
and in 2009.
                                
 Slovak inflation is expected to slow by the end of 2008,
from an annual 4.5 percent in September, while it should remain
one of the fastest expanding economies in the EU with a
government forecast of 7.0 percent real GDP growth this year.
                                
 Slovakia, which also cut its main two-week rate by 50 basis
point in October, must have borrowing costs on a par with the
euro zone when it becomes the 16th member of the bloc on Jan. 1.
                                
 "With much of the single currency area sliding into
recession and inflation set to fall sharply next year, we expect
the ECB to cut by another 50 basis points in December," said
Neil Shearing, Emerging Europe economist at Capital Economics in
London.
                                
 "Accordingly, the Slovak policymakers are likely to have to
lower interest rates again to 2.75 percent by the end of the
year, with the move likely to come at December's rate setting
meeting," Shearing said.
                                
 The central bank will hold meetings on monetary policy
issues and interest rates on Nov. 25 and Dec. 19.
 (Reporting by Peter Laca; editing by Patrick Graham/Tony
Austin)