* WHAT: May EU-norm inflation, June interest rate decision
* WHEN: June 16, June 24
* Inflation forecast at 3.9 percent, rates seen flat
By Martin Santa
BRATISLAVA, June 3 (Reuters) - Slovakia's annual inflation
is expected to have reached a 20-month high in May, a Reuters
survey showed on Tuesday, and analysts said price growth was
unlikely to slow down in the coming months.
The survey of eight analysts also showed the key two-week
repo rate would stay on hold in June, although some market
watchers said the rising crown could allow a cut in the
borrowing costs in the near future to align them with the euro
zone as part of the euro adoption process.
The median forecast in the Reuters survey put the annual
EU-norm inflation rate at 3.9 percent in May, its highest level
since September 2006, compared with 3.7 percent in April.
Monthly consumer price growth was seen at 0.2 percent, after
a 0.3 percent rise in the previous month.
Slovakia, which is set to become the 16th member of the euro
zone next year, has seen accelerating price growth in recent
months on the back of global rise in food and energy costs.
"We expect exogenous factors, fuel and food prices, to be
the key inflation drivers in May," said Eduard Hagara, an
analyst with ING Bank in Bratislava.
"Inflation should hover near, or at 4.0 percent, by
September and start decelerating slightly afterwards... We see
end-year annual inflation at 3.7-3.8 percent," Hagara said.
The National Bank of Slovakia (NBS) has said factors driving
inflation are outside of the influence of its monetary policy.
The bank also has little leeway left to affect the economy as it
will have to level the official borrowing costs with the euro
zone by the end of the year.
The NBS held the main two-week repo rate flat at 4.25
percent for the 13th consecutive month in May, preserving a 25
basis point premium over the euro zone benchmark.
Some analysts said rapid household spending growth within
first quarter GDP growth pointed to demand-led inflation
pressures and warranted cautious monetary policy approach.
But rising Slovak crown <EURSKK=>, which is up 5.6 percent
since the European Commission said on May 7 that the country was
ready to adopt the single currency, has tightened monetary
conditions and helps Slovakia to tame inflation.
"Significant (monetary) tightening was already secured by
the strengthening crown," UniCredit Bank analysts said in a
note.
"Therefore, we will most likely revisit our outlook that the
NBS will cut rates in the last possible moment," UniCredit said,
adding that alignment of Slovak rates with the euro zone could
come anytime in the coming months.
The crown's advance was capped by a 15 percent revaluation
of its peg to the euro within the ERM-2 currency grid last week.
(For survey table, please click on [])
(Writing by Peter Laca)
