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Šramko will be strict on prices

NATIONAL Bank of Slovakia (NBS) Governor Ivan Šramko has not ruled out further hikes in key interest rates. “We still have a feeling that monetary policy should be stricter in order to have a positive impact on price developments,” the governor said at the Hospodárske Noviny Club discussion forum.

According to Šramko, Slovakia could reach an average inflation rate of 2.5 percent in the spring of 2008, which would be enough to fulfil the Maastricht inflation criteria needed for adoption of the euro. It is expected that the inflation limit will be set at 2.8 percent at that time.

However, price rises remain the greatest risk for adoption of the euro in Slovakia in 2009, the daily Hospodárske noviny wrote.

The NBS expects the year-end inflation rate to be 3.9 percent. “It is very important for us to be able to orient monetary policy in such a way that [inflation] will start decreasing,” Šramko said.

The central bank has increased interest rates four times since January this year by a total 1.75 percentage points. The key two-week repo rate is at 4.75 percent, while refinancing operations are at 6.25 percent and the overnight repo rate for draining excess market liquidity is at 3.25 percent.

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