Tuesday, August 19, 2008

Finance ministry not expecting interest rate changes by central bank till year-end.

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Finance ministry not expecting interest rate changes by central bank till year-end. The National Bank of Slovakia (NBS) should keep the base interest rate flat till the end of the year, according to the latest finance ministry’s macroeconomic report. It argues that rate cuts are to be prevented by the generally unfavourable inflation outlook. External factors like rising oil and food prices stood behind the accelerating price growth in the country and the finance ministry held that otherwise, the domestic inflation environment in the country was rather mild. It thus implied that no demand pressure from an overheating of the economy was considered as a risk at this stage. Consequently, the ministry pointed out that interest rate hikes were also not called for either in order not to jeopardize the economic growth and concluded that the rate should be kept unchanged till the end of the year. Afterwards, Slovakia stands to lose its independence over monetary policy since it would join the eurozone and the rates would be decided by the ECB. Precisely because of that, however, the NBS seems bound in its rate decisions till the end of the year to keep the base rate aligned with the one in the eurozone as is currently the case. Thus, any changes in the monetary policy stance till the end of the year would be governed by the respective rate motion by the ECB rather than any analysis of domestic economic developments.

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Finance ministry not expecting interest rate changes by central bank till year-end.

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