INSTANT VIEW 4-Czech March CPI rises in line with forecast

...inflation rate to edge up to 1.9 percent from 
1.5 percent. 
    The figure left inflation just below the 2 percent bottom of 
the tolerance band of the central bank's target with a 3 percent 
mid-point and was likely to cement market expectations of flat 
interest rates in the near-term. 
 
KEY POINTS: 
(pct change)          March       Feb          March forecast 
 month/month          0.3         0.3           0.3 
 year/year            1.9         1.5           1.9 
 
 (Details of March inflation data................[ID:nPRA001240] 
 (Details of March jobless data..................[ID:nL10651769] 
 
- The monthly rise comes mainly on the back of a 3.3 percent 
increase in tobacco prices because of a delayed impact of an 
excise tax hike. 
- Fuel prices also drove overall consumer prices (CPI) higher, 
rising 3.3 percent after six consecutive months of declines. 
- Food prices up 0.1 percent month-on-month, while leisure 
prices fall 0.9 percent due to a drop in holiday prices at the 
end of the winter season. 
 
COMMENTARY: 
    DAVID MAREK, CHIEF ANALYST, PATRIA FINANCE, PRAGUE 
    "Inflation remained below 2 percent despite being pressured 
by a tobacco excise tax hike and higher fuel prices, which were 
reacting to a renewed oil price rise. 
    "(Adjusted) inflation, which is key for monetary policy, is 
hovering slightly above 1 percent and judging by the forecast 
which sees it moving to 2-3 percent within a year, a mild rise 
in interest rates can be expected. The CNB will probably start 
tightening monetary conditions in the second half of the year." 
     
    JAN VEJMELEK, HEAD OF ECONOMIC AND STRATEGY RESEARCH, 
KOMERCNI BANKA, PRAGUE 
    "The March inflation result is already only about 0.1 
percentage point below the CNB's forecast from January. We do 
not see any reason for financial markets to react in any 
significant way to the data release. 
    "What will be key for a further interest-rate setting is the 
quarterly update of the inflation projection, which the CNB will 
discuss at the end of this month." 
     
    PETR DUFEK, ANALYST, CSOB BANK, PRAGUE 
    "March inflation surprised neither by the headline number 
nor by its structure. This means that the scenario of inflation 
near 2 percent continues and only the end of this year will 
there be an increase towards the CNB's target level, and this 
will only be because of a tobacco price rise. 
    "For the CNB and the market, today's number does not change 
anything. The Czech Republic may continue to enjoy very low 
interest rates." 
 
MARKET REACTION: 
- Crown flat at 27.875 per euro  by 0722 GMT from 
27.890 just before the news. Government debt yields steady. 
 
BACKGROUND: 
- The central bank held the key two-week repo rate steady at 2.5 
percent  in March. 
- Report on last Czech c.bank rate decision      [ID:nPRA001221] 
                 [ID:nL06735130] [ID:nPRA001222] [ID:nL29598110] 
- The central bank (CNB) targets headline inflation which it 
seeks to keep at 3 percent year-on-year, allowing for 
fluctuations by plus/minus one percentage point from this level. 
- The CNB's quarterly prediction sees consumer prices rising 
2.4-3.8 percent year-on-year in December 2007 and 2.8-4.2 
percent in June 2008. 
 
LINKS: 
- For further details on March other past inflation data, 
Reuters 3000 Xtra users can click on the Czech Statistical 
Bureau's website: 
    http://www.czso.cz/eng/csu.nsf/kalendar/2004-ISC 
 
- For LIVE Czech economic data releases, click on        
- Instant Views on other Czech data                 [CZ/INSTANT] 
- Overview of Czech macroeconomic indicators            [CZ/ECI] 
 
- Key data releases in central Europe    [CEE-CONVERGENCE-WATCH] 
- For Czech money markets data click on                 
- Czech money guide                                       
- Czech benchmark state bond prices                    
- Czech forward money market rates                       
 
  
  Keywords: CZECH ECONOMY/INFLATION