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Inflation up to 4.5 percent, rate hike expected

IN APRIL 2006 annualized inflation in Slovakia reached 4.5 percent, 2 percentage points above the central bank's target level.

The rise in inflation was due especially to growing household consumption and consumer borrowing. Analysts believe that the National Bank of Slovakia (NBS) could increase the basic interest rate from the current 3.5 percent to 4.0 percent at the end of May.

However, even if the NBS does increase its key rate to 4 percent, commercial banks will not necessarily follow suit.

"To a considerable extent, banks have already factored in the expected rate hike to their [current] interest rates," said UniBanka economist Viliam Pätoprstý.

Most banks increased their rates at the beginning of this year following the NBS rate hike in February.

Compiled by Martina Jurinová from press reports
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