INSTANT VIEW 2-Czech May CPI lags forecast with 2.4 pct rise

...inflation rate to ease to 2.4 percent from an 
7-month high of 2.5 percent a month earlier. 
 
KEY POINTS: 
(pct change)          May         April         May forecast 
 month/month          0.4         0.7           0.5 
 year/year            2.4         2.5           2.5 
 
 CENTRAL BANK FORECAST. 1.8-2.0 percent annual CPI rate for May 
envisaged by its most recent projection unveiled in April. 
 
 (Details of May inflation data..................[ID:nPRA001338] 
 (Details of May jobless data....................[ID:nL08528496] 
 
- The monthly rise comes on the back of a 4.3 percent rise in 
fuel costs, the third consecutive month of gains. 
- Tobacco prices up 2.6 percent, largely because of the delayed 
impact of a sales tax hike. 
- Food prices down 0.2 percent. 
- Regulated rents up 2.0 percent. 
 
COMMENTARY: 
    RADOMIR JAC, CHIEF ECONOMIST, PPF ASSET MANAGEMENT, PRAGUE 
    "No big surprise as both the headline figure and its 
structure are close to expectations. Food prices served as an 
anti-inflationary factor in May but we read this just as 
volatility.  
    "There is no surprise at all to see a further increase in 
prices of cigarettes, regulated rents and automotive fuels. The 
fact that disinflation in the apparel group is diminishing 
should serve as a signal to the central bank that the strong 
consumption demand is starting to feed through to inflation. We 
think annual inflation may test even 4.0 percent by year-end." 
 
MARKET REACTION: 
- Crown largely steady at 28.455 per euro  by 0719MT 
from 28.440 just before the data. 
- Debt yields up on the day. 
 
BACKGROUND: 
- The central bank increased the key two-week repo rate by 25 
basis points to 2.75 percent  last month. Three out 
of six policymakers voted for the hike, while the remaining 
three wanted no rate change. 
- Report on last Czech c.bank rate decision      [ID:nPRA001319] 
                                 [ID:nL31276683] [ID:nL31320495] 
- 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 May 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] 
 
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- For Czech money markets data click on                 
- Czech money guide                                       
- Czech benchmark state bond prices                    
- Czech forward money market rates                       
 
  
  Keywords: CZECH ECONOMY/INFLATION