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UPDATE 1-Slovaks cut key rate by 50 bps after ECB move

Published 11/11/2008, 07:20 AM
Updated 11/11/2008, 07:22 AM

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BRATISLAVA, Nov 11 (Reuters) - Slovakia's central bank cut its main two-week repo rate by 50 basis points to 3.25 percent on Tuesday, in an unflagged move to bring it back in line with euro zone borrowing rates before it joins the euro in January.

The Slovak move followed a 50 basis point reduction in the ECB's benchmark rate made last week amid easing inflation pressures and threats of the first recession in the single currency area in its 10 year history.

The National Bank of Slovakia (NBS) changed its rates at a regular weekly meeting of its policy-making board which was not scheduled to make a decision on monetary policy.

The bank normally discusses monetary issues and decides on interest rates at a meeting at the end of the month.

The NBS also cut the overnight repo rates to 2.25 percent for draining market liquidity from 2.75 percent, and its rate for refinancing operations to 4.25 percent from 4.75 percent.

It did not comment further on the rate changes, saying it would provide more information later on Tuesday.

Slovakia, which also cut its main two-week rate by 50 basis point at the end of October, must have borrowing costs on par with the euro zone when it becomes the 16th member of the bloc on Jan. 1.

ECB President Jean-Claude Trichet said last week he did not exclude a further rate reduction in December, depending on economic data and projections.

The Slovak central bank would have to cut its rates further if the ECB proceeded with another reduction of its own.

The Slovak crown, which now has a formal conversion rate to the euro for the switchover, did not react to the rate cut. (Reporting by Peter Laca; editing by Patrick Graham)

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