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Slovakia: CB kept interest rates on hold
Wed, Mar 26 2008, 10:42 GMT
by Michal Musâk
Erste Bank der oesterreichischen Sparkassen AG
Interest rates remain on hold, as expected
Slovak central bank left policy interest rates intact on its meeting today, in line with the widespread expectations of the market. The 2W repo rate stays at 4.25%, while O/N rates remain at 2.25/5.75%. Press conference and comments will be released at 13:00 CET.
Without the 2009 euro adoption plan, inflation acceleration could have warranted an interest rates hike (although main sources of the pick-up in price growth in recent months were food prices, admittedly outside the influence of the monetary policy). However, with euro adoption in sights (assuming assessment by European authorities will be favourable) any rate increase would only have a short-lived impact, as Slovakia will also adopt European interest rates along with the euro.
Current base ECB rate stands at 4.0% and the market predicts 50bp in ECB rate cuts by the year-end. Subsequently, we think that the Slovak CB cuts rates to the ECB level as soon as Slovakia gets positive evaluation and 2009 euro adoption will be sure enough (in May or June). On the contrary, in the improbable scenario that our 2009 euro bid is rejected, CB rates might gradually head upwards.
Published on Wed, Mar 26 2008, 10:45 GMT
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Erste Bank
http://global.treasury.erstebank.com | Rainer.Singer@erstebank.at
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