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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 of the NBS discussed and approved the Situation Report on the Monetary Development in the Slovak Republic in April and concluded that the macroeconomic development based on monthly indicators does not vary significantly from the latest Medium-term Forecast. The development of inflation is henceforward driven by cost factors and the economic growth in the first quarter of 2008 was in line with the assumptions of the central bank. In the light of given facts it was not necessary to reset the monetary policy.

In its decision making, the Bank Board of the NBS took into account the following information: Inflation measured by the harmonized index of consumer prices in comparison with March slightly increased its year-on-year dynamics. In comparison with the NBS´s assumptions, inflation recorded a moderately higher increase in April, which was caused particularly by the price development of unprocessed foodstuffs. The development of energy and foodstuff prices is subsequently reflected also in prices for services.

Based on monthly indicators, there was a deceleration of a year-on-year dynamics of retail receipts as well as receipts and production of industrial and building production in March. This was probably shown also in the development of foreign trade that in comparison with previous months recorded a moderate deficit in March. Joined with the revised data for the first two months this year, foreign trade was developing in line with the NBS estimates. Equally, the quick estimate of GDP published by the Statistical Office of the SR reached in the first quarter of 2008 the dynamics which is in compliance with the Medium-term Forecast of the NBS. A relatively fast growth of employment indicates that there is still free labour force on the labour market. Based on the discussion on the macroeconomic development in April, in the context of approved Medium-term Forecast and the expected adoption of the common currency, the Bank Board of the NBS concluded that the inflation development has been in influenced by energy and foodstuff prices, i.e. by cost factors.

Even though the growth of economy itself does not signalize overheating and there is no increase or occurrence of new risks, the NBS considers important to know the GDP structure. With regard to given factors, the Bank Board of the NBS decided to leave the set level of interest rates unchanged. Within a discussion of the Bank Board of the NBS concerning the set level of the NBS interest rates, none of the present members made a proposal for a change in 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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