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Rationale behind the decision of the Bank Board of the NBS on the set levels of the NBS interest rates

The Bank Board approved the Situation Report in the Slovak Republic in January 2008. Based on its latest data on macroeconomic development, the Bank Board of the NBS concluded that the pro-growth influence in foodstuffs prices development continues in the growth rate of consumer prices. In the real economy a dynamic GDP growth has been shown which was also connected with the one-off effect of tobacco products pre-loading.

Without this factor, the Bank Board concluded that in the year 2007 the economy development was in line with the estimates of the central Bank. When considering the current and expected macroeconomic development, the Bank Board of the NBS decided on leaving the current levels of the NBS interest rates. In its decision-making, the Bank Board of the NBS took into consideration the following factors. In connection with the fact that at the time of the Bank Board of the NBS´s decision-making no information about inflation development measured by the harmonized index of consumer prices was available, inflation as measured by the CPI national index was taken into consideration. Based on its development it is possible to conclude that in comparison with the NBS´s expectations, mainly foodstuffs and energy prices increased more rapidly. Their current growth rate development also appeared in the increasing growth rates of some prices of services. In the view of the central Bank this clearly refers to a cost-push factor of inflation development.

The Statistical Office of the SR has released a flash estimate of the development of the economy in the last quarter of the last year, from which a considerable growth rate of GDP arose.

This was affected by a high tax collection from products, connected mainly with the pre-loading of cigarettes. The high growth of the economy reflected not only demand-pull factors but, above all the one-off factors. However, it will be important for the central Bank also to know the detailed structure of GDP growth. The exchange rate development was in January, as well as at the beginning of February, more volatile when compared with previous periods. this was connected with the development on international financial markets and with the development in the neighbouring regions.

The discussion on the Situation Report in Slovakia in January 2008 it emerged that the deviations of the macroeconomic development from the NBS´s estimates are caused by the cost-push factors or the one-off factors. The Bank Board of the NBS had so far no reason to change the current monetary policy setting. During the Bank Board discussion on the set level of the NBS interest rates, none of the members present filed a motion to change the interest rates.

Jana Kováčová
Spokesperson of the NBS

National Bank of Slovakia
Communications Section
Imricha Karvasa 1, 813 25 Bratislava, Slovak Republic
Tel.: +421-2-5787 2161,+421-2-5865 2161, +421-2-5787 2166, +421-2-5865 2166

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