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Growth meets central bank forecast

THE ANTICIPATED economic development in Slovakia is in line with the central bank's projections, the governor of the National Bank of Slovakia (NBS), Ivan Šramko, said on June 24, after the bank's board kept key interest rates unchanged, the SITA newswire wrote.

THE ANTICIPATED economic development in Slovakia is in line with the central bank's projections, the governor of the National Bank of Slovakia (NBS), Ivan Šramko, said on June 24, after the bank's board kept key interest rates unchanged, the SITA newswire wrote.

"In inflation development, there is a significant effect only on the side of cost factors so far,“ said Šramko.


He added that to prevent inflation, the negative effect of demand factor as well as growth in wage rates must be slowed, especially in the public sector.

"Labour productivity in the whole economy is lagging behind the growth rate of wages, and labour costs per employee have increased considerably compared with the previous year," said Šramko as for the risk factors to inflation.

According to the governor, the strong crown is also helping the central bank to fight inflation.
"Based on the growth of inflation risks, the development of the exchange rate in the recent period is acting restrictively on monetary conditions and, based on the expected accession to the eurozone in 2009, the possibility of use of other monetary policy instruments is already limited,“ he said.

In line with analysts' expectations, the central bank did not change key interest rates. The two-week sterilization repo-rate remains at 4.25 percent p.a., which is 25 basis points above the current rate of the European Central Bank (ECB).

Slovakia will have to fully harmonise its interest rates with the ECB when it enters the eurozone.

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