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Inflation safely below euro reference value

THE INFLATION rate in Slovakia picked up last month, before the end of the reference period for the evaluation of the Maastricht inflation criterion, but fulfillment remains highly likely. Data released by the Statistics Office shows that year-on-year harmonised inflation increased from January's 3.2 percent to 3.4 percent in February. Its twelve-month average, standing at 2.1 percent as of February, remains relatively far below the reference limit of 3.1 percent, the SITA newswire wrote.

THE INFLATION rate in Slovakia picked up last month, before the end of the reference period for the evaluation of the Maastricht inflation criterion, but fulfillment remains highly likely. Data released by the Statistics Office shows that year-on-year harmonised inflation increased from January's 3.2 percent to 3.4 percent in February. Its twelve-month average, standing at 2.1 percent as of February, remains relatively far below the reference limit of 3.1 percent, the SITA newswire wrote.

Citibank analyst Jaromír Šindel predicts that the twelve-month average for harmonised inflation will be 2.2 percent at the end of the reference period, namely in March 2008. He estimates the reference value will be close to 3 percent. If this scenario is realised, Slovakia would meet the nominal inflation criterion with a cushion of 0.8 percentage points. According to analysts, rising inflation highlights the need to safeguard a low and sustainable inflation rate following euro adoption, despite the cushion. Šindel said that he expects stronger efforts on the part of the Slovak government in fiscal consolidation. Stronger inflation raises the pressure on those who will fix the euro conversion rate. Rising inflation could back efforts for a stronger conversion rate, ING Bank analyst Eduard Hagara said.

Analysts expected consumer prices to remain at January's levels in the second month of this year. Hagara assumes that relative item weight in the consumer sphere, measured by a harmonised methodology as opposed to a national methodology, could lie behind this moderate acceleration.

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