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Central bank cuts key interest rates

AFTER MORE than two years without change, the National Bank of Slovakia (NBS) cut its key interest rate on March 28. It reduced the two-week sterilization repo rate by 25 basis points to 4.5 percent, and lowered the one-day refinancing repo rate by 25 basis points to 6.0 percent and the one-day sterilization repo rate by 75 basis points to 2.5 percent, the NBS told the SITA news agency.

The central bank attributed the changes to the country's favourable inflation development and the strength of the Slovak crown.

The economic growth was not seen to put pressure on demand inflation and the NBS came to the conclusion that no further pro-growth risks could be seen in the inflation rates since economic development was in line with NBS expectations, said NBS Vice-Governor Martin Barto.

By lowering rates, the central bank hopes to lower the attractiveness of the crown in the eyes of foreign investors.

After the rates were cut, the Slovak crown strengthened. It appreciated by about 10 haliers to 33.62 SKK/EUR. Analysts said this might be linked with the original expectations of the market, which had expected a reduction of as much as 0.5 percentage points.

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