Central bank increases key rates by 0.5 percent

AT ITS MEETING on February 28, the board of Slovakia's central bank increased key interest rates by 50 basis points as of March 1.

The one-day sterilization repo rate increased from 2.0 to 2.5 percent, the one-day refinancing rate from 4.0 to 4.5 percent and the two-week sterilization repo rate from 3.0 to 3.5 percent.

The decision surprised analysts, who had expected the central bank to increase rates by only 0.25 percent.

Bank Governor Ivan Šramko said the move aimed to help Slovakia meet its inflation targets. According to the bank, both the economy and prices are growing too fast, the Pravda daily reported.

According to the Statistics Bureau, the Slovak economy grew by 7.5 percent year-on-year in the last quarter of 2005.

The Slovak crown reacted to the rate increase by strengthening to a new record against the euro, 37.06 SKK/EUR. It is expected that in the coming days the crown could even break the 37.00 SKK/EUR level.

Compiled by Martina Jurinová from press reports
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