By Peter Laca
VIENNA (Reuters) - Slovak EU-norm inflation has picked up more than expected due to food price growth, but there is no big need to tighten monetary conditions, central bank (NBS) board member Ludovit Odor said on Tuesday.
Speaking at the Reuters Central European Investment Summit, Odor said he believed Slovakia was on track to meet the inflation condition for euro adoption, which the ex-communist European Union member targets for the beginning of 2009.
"(Monetary conditions) are in a tighter zone, so basically we are a little bit tightening policy conditions mainly because of the exchange rate channel," Odor said.
"I would say that at this moment I do not see some huge need to tighten very much the monetary policy conditions because I think that they are close to some optimal level at this stage."
Slovak EU-norm inflation jumped to 1.7 percent on an annual basis in September, from a historical minimum of 1.2 percent booked in both August and July, above market expectation of a 1.6 percent rise.
"This is not a big surprise, that food prices were behind the rise. But the magnitude (of the rise) was a little bit of a surprise for the central bank," Odor said.
"It seems to us that this trend could continue in the coming months ... This could be translated into the new forecasts of the NBS which will be released very soon. We expect to revise our forecast at least for the next two years."
Odor said a good way for Slovak monetary policy would be to leave the key two-week repo rate at the current level of 4.25 percent and let the euro zone rates, now at 4.0 percent, converge ahead of euro entry. Continued...
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