The National Bank of Slovakia (NBS) views the current level of key interest rates appropriate to the development of the real economy and the relation between real interest rates and savings, even though the latest price development and predictions until the end of the year do not hint that demand inflation pressure would develop. But the central bank warned in its monetary report that in case of groundless pressure on the Slovak currency to appreciate, it will also use money market instruments to avert this.

In line with market expectations, the NBS bank board has decided to leave the key interest rates unchanged. This means that one-day sterilization repo rate remains at 5.0 percent p.a. and one-day deposit rate is 8.0 percent p.a. Two-week sterilization repo rate is at 6.5 percent p.a.

The year-on-year headline inflation was 7.7 percent in April and consumer prices increased by 0.2 percent over this month compared with March. Especially growth of regulated prices was behind the April movement of consumer prices. Within items of core inflation, prices of market services rose as a consequence of secondary impacts of administrative measures taken in early 2003. In general, the price development continued to be determined especially by cost factors.

In March, the deficit on the current account of the balance of payments decreased again, exclusively as a consequence of favorable development of foreign trade. „But the almost 40 percent drop of the trade deficit influenced development of the exchange rate of the Slovak currency, especially towards the US dollar,“ wrote the central bank. It maintains that April foreign trade figures document a moderate slowdown of the year-on-year decrease of the trade deficit. The central bank expects that the favorable growth dynamics of exports would gradually decelerate.

The central bank expects that in May changes in regulate prices as well as fading secondary impacts of administrative interventions from the previous period affected the price development. Regarding expected increase in excise taxes as of July 2003, the NBS predicts that the year-on-year growth dynamics of headline inflation would pick up.