INSTANT VIEW 5-Czech April CPI beats fcast with 2.5 pct rise

...of 2.5 
percent from 1.9 percent a month earlier. 
    The figure returned to the central bank's tolerance band of 
one percentage point either side of a 3 percent target and 
sparked a rise in money market rates as investors shortened the 
odds on an interest rate increase as early as this month. 
 
KEY POINTS: 
(pct change)          April       March        April forecast 
 month/month          0.7         0.3           0.4 
 year/year            2.5         1.9           2.2 
 NOTE. The central bank had predicted 2.1-2.2 percent inflation 
on an annual basis, according to its April Inflation Report. 
 
 (Details of April inflation data................[ID:nPRA001288] 
 (Details of April jobless data..................[ID:nL10317377] 
 
- The monthly rise comes on the back of a 1.6 percent rise in 
food prices, a 4.3 percent rise in fuel costs and 2.1 percent 
growth in tobacco prices because of a delayed impact of a sales 
tax hike. 
- Natural gas prices up 1.4 percent, heating costs 0.6 percent 
higher, regulated rents edge up 0.9 percent. 
- Clothing and footwear prices up 1.2 percent month-on-month. 
 
COMMENTARY: 
    VIKTOR KOTLAN, CHIEF ECONOMIST, CESKA SPORITELNA, PRAGUE 
    "The risks to our scenario of an interest rate rise in July 
are skewed towards earlier central bank action. We still keep 
our forecast of a 3.0 percent repo rate in December 2007. We are 
currently below market expectations, but we do not mind that." 
     
    PAVEL SOBISEK, ECONOMIST, UNICREDIT BANK, PRAGUE 
    "The inflation picture is changing. It is no longer only 
administrative changes that drive CPI higher. It's starting to 
be clear that the disinflationary impact of the previous crown 
appreciation is diminishing. 
    "This is certainly supportive for the more hawkish camp on 
the CNB board, with a May rate hike coming back into 
contention." 
     
    JAN VEJMELEK, HEAD OF ECONOMICS AND STRATEGY RESEARCH, 
KOMERCNI BANKA, PRAGUE 
    "The April inflation result significantly exceeded not only 
the market expectation but also the CNB's assumption presented 
in the April forecast. 
    "While inflation developments in the first quarter were 
below the January CNB forecast and posed essentially the only 
argument against raising interest rates, the CNB is losing also 
that argument now. 
    "A rise in interest rates at the end of May is thus a more 
distinct possibility." 
     
    RADOMIR JAC, CHIEF ANALYST, PPF ASSET MANAGEMENT, PRAGUE 
    "The reported acceleration (in annual inflation) went beyond 
any imagination. Also the structure of the figure shows that the 
acceleration in annual growth was quite broad-based. The jump in 
overall inflation was mainly driven by food prices, cigarettes 
(excise tax impact) and by prices of telecommunication services. 
    "Nevertheless, it looks as though inflation net of impact of 
regulated prices, taxes and food prices also went higher in 
April.  
    "The April data, combined with the relatively weak crown, is 
a clear signal for the Czech central bank to restart its 
tightening cycle as early as at their May 31 board meeting. The 
market may start to speculate that the Czech repo rate will 
climb above 3.00 percent by the end of the year." 
     
    ALES MICHL, ANALYST, RAIFFEISENBANK, PRAGUE 
    "We do not expect today's surprisingly high inflation number 
to be decisive for a rise in interest rates in May, even though 
it is tempting to consider raising rates because of a weaker 
crown. 
    "In our view, the Czech National Bank will wait until at 
least June for data about gross domestic product (GDP) growth 
and wages in the first quarter." 
 
MARKET REACTION: 
- Crown flat at 28.265 per euro  by 0735 GMT, after 
recovering from Wednesday's 2-month lows. Short-dated market 
rates edge more than 5 basis points higher. 
 
BACKGROUND: 
- The central bank held the key two-week repo rate steady at 2.5 
percent  in April. 
- Report on last Czech c.bank rate decision      [ID:nPRG000331] 
                                 [ID:nL26624395] [ID:nPRA001284] 
- 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 
3.2-4.2 percent year-on-year in December 2007 and 2.7-4.1 
percent in December 2008, consumer inflation net of impact of 
indirect tax changes rising 2.1-3.5 percent year-on-year in 
March 2008 and 2.2-3.6 percent in September 2008. 
 
LINKS: 
- For further details on April 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  
    

[PRAGUE/Reuters/Finance.cz]