Slovak Central Bank to Continue with Standard Rates
The central bank of Slovakia maintained its benchmark rates for the tenth consecutive month so that inflation can be kept to its minimum which in turn will let Slovakia embrace the euro in the next year. The Vice Governor of the central bank Viliam Ostrozlik after a meeting in Bratislava, Slovakia, told reporters that the policy makers will be maintaining the two week repurchase rate at 4.25%. The bank’s decision to maintain the rates was expected by the thirteen economists whom Bloomberg had surveyed. The pressure on Slovakia to control its inflation is great because it is going to adopt the euro currency in 2009 after Slovenia, which was the first communist nation to take to the euro.
Economists are of the opinion that even price growth has increased its speed and has been tamed by the improving currency and the growth is also not that fast so that increase in rates can be justified. The central bank also has to manage borrowing overheads to the euro zone. The economist with Slovenska Sporitelna AS in Bratislava, Maria Valachyova says that monetary conditions are being made restrictive by the strengthening of Koruna and the restrictive monetary conditions will assist in fighting the risks of inflation. The economists further held that the Slovak central bank will be maintaining the rates unless the EU decides about the euro-adoption bid.
The Koruna traded against the euro at 32.765. Koruna’s gain this year is about 2.5% based on the expectations that Slovakia will appreciate the central rate by which Koruna is attached to the euro. Peter Sevcovic, the board member said that the Koruna’s latest temporary volatility will have little effect on the inflation. The credentials needed for countries to switch to the euro state that nations must maintain their 12-month standard yearly inflation rates within 1.5% points of the standard of the three European Union nations with the most sluggish growth of price.
Although growing prices of food and energy pressed the rate of inflation to 3.8% in January which was the highest in thirteen months, the standard price growth is going to stay down in the European Union’s standards. The governor also said that the highest economic growth of 14.1% for the fourth quarter does not indicate demand pressures in the economy. The Governor of the central bank of Slovakia Viliam Ostrozlik further added that that development of the economy is in accordance with the expectations of the bank and there is no need to make any changes in the monetary policy. If the EU accepts Slovakia’s currency switchover bid in the current year the central bank will have to meet its interest rates with that of the euro regions zones. As per the average estimate of twenty four economists, Bloomberg surveyed the European Central Bank which is likely to bring down its standard two-week rate by half-a-point for the current year from its 4%. The improving prospect earlier this year made the National Bank of Slovakia to cut its standard rate by half a point.
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