By Martin Dokoupil
BRATISLAVA, March 13 (Reuters) - Slovak inflation
accelerated to a 14-month peak in February on housing and food
costs, data showed on Thursday, but analysts said the country
remained on track to meet the inflation test for euro adoption.
Inflation, calculated by local standards, was 4.0 percent on
the year, after 3.8 percent in January, the Slovak Statistics
Office said. The market had expected a rate of 3.9 percent.
Prices rose 0.4 percent on the month, also slightly above
analysts' forecast for a 0.3 percent increase.
"Inflation was slightly higher than expected due to imputed
rents, but this item is not included in the EU-harmonised index,
so there should be no surprise," said Tatra Banka analyst Juraj
Valachy.
The central bank's (NBS) inflation target is based on the
EU-norm consumer price index (HICP) as part of Slovakia's plan
to adopt the euro next year. Imputed rents are costs for
maintenance services and repairs paid as part of rents.
Analysts said the different HICP make-up meant the key price
gauge would be in line with forecasts for a 3.3 percent annual
rise, also a 14-month high, when the data are issued on Friday.
The domestic gauge should also have no impact on monetary
policy in the near term as economists expect Slovakia to be
below the inflation threshold for euro adoption when its
readiness to join the euro zone is assessed in the spring.
"Slovakia will keep meeting the Maastricht (target), there
is no change in that and the buffer will still be big enough,"
said Silvia Cechovicova, an analyst at CSOB Bank in Bratislava.
"We expect rates to remain flat until the decision on euro
adoption," she said. "Until then, the central bank's room for
manoeuvre room is limited. Still, they have little power to
influence inflation as it's mainly driven by cost factors."
The NBS left its key two-week repo rate at 4.25 percent for
the 10th month in a row in February, keeping a 25 basis point
premium over the euro zone benchmark.
Slovakia's 12-month average inflation must not be more than
1.5 percentage points above the average of the three lowest
rates in the EU to qualify for euro zone entry.
But any applicant also has to prove inflation will stay low
over time and accelerating inflation might prompt the Slovak
government to seek a stronger conversion rate for euro adoption.
"This is rather a signal for the government (than for the
central bank)," said Eduard Hagara, an ING Bank analyst.
"The government wants a strong crown to sustain low
inflation. Rising prices could motivate them to have a stronger
rate when setting conversion rate against the euro," he said.
The crown, which hit a record high of 32.250 per euro
<EURSKK=> last week, did not react to Thursday's data.
(For details, please see [])
(Additional reporting by Peter Laca and Martin Santa, editing
by Dave Graham)
