INSTANT VIEW 3-Czech August annual CPI 2.4 pct, in line

...inflation rate to 2.4 percent from 2.3 
percent a month earlier. 
**************************************************************** 
KEY POINTS: 
(pct change)          Aug         July          Aug forecast 
 month/month          0.3         0.4           0.3 
 year/year            2.4         2.3           2.4 
 
 CENTRAL BANK FORECAST: 2.5-2.8 percent annual CPI rate for 
August envisaged in its most recent projection unveiled in July. 
 
 (Details of August inflation data.................[nPRA001488] 
 (Details of August jobless data...................[nPRA001490] 
 
- Tobacco prices up 6.2 percent month-on-month, the eighth 
consecutive month of gains following increases in tobacco excise 
taxes by the government. 
- Foreign holiday prices jump 6.1 percent from July 
- Regulated rents up 1.2 percent on the month. 
- Fuel prices dip 0.3 percent on the month, the first fall after 
five months of growth. 
- Food prices down 0.4 percent month-on-month. 
 
COMMENTARY: 
    RADOMIR JAC, CHIEF ANALYST, PPF ASSET MANAGEMENT, PRAGUE 
    "Czech August inflation did not surprise on the headline 
level although the seasonal increase in recreation prices is 
lower than expected due to methodological reasons - similar to 
July. Nevertheless, this was fully compensated by a sharp 
increase in tobacco and alcohol prices. 
    "In the months to come, Czech inflation is sentenced to grow 
due to base effect, price deregulation and at the beginning of 
2008 also due to increase in indirect taxes. However, although 
the central bank will most likely deliver at least one more 
interest rate hike before the end of the year, its mission to 
normalize interest rates may become more and more complicated 
due to expected strengthening of the Czech crown." 
     
    PETR DUFEK, ANALYST, CSOB, PRAGUE 
    "The structure is not surprising, apart from a bit faster 
cigarette (price growth) and slower holidays. Inflation remains, 
as it was in the previous month, 0.2 percentage points below the 
central bank forecast, which gives arguments to the doves on the 
board, however this, another good number in a row, will likely 
not change the drive of the hawks in the board." 
     
    JAN VEJMELEK, HEAD OF ECONOMIC AND STRATEGY RESEARCH, 
KOMERCNI BANKA, PRAGUE 
    "August inflation was no surprise, it was in line with 
expectations. However we fear a relatively significant 
acceleration of inflation, toward the end of this year and 
mainly in the first quarter of 2008." 
 
MARKET REACTION: 
    Crown currency touch firmer at 27.572 to the euro  
from 27.58 before the data. 
     
BACKGROUND: 
- The central bank increased the key two-week repo rate by 25 
basis points to 3.25 percent  in August. 
- Report on last Czech c.bank rate decision      [ID:nL30781459] 
                  [ID:nPRA001485] [ID:nL07203646] [ID:nL3044281] 
- 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 
3.5-4.9 percent year-on-year in June 2008 and 3.5-4.9 percent in 
December 2008, consumer inflation net of impact of indirect tax 
changes rising 2.6-4.0 percent year-on-year in June 2008 and 
3.0-4.4 percent in December 2008. 
 
LINKS: 
- For further details on August 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                                       
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- Czech forward money market rates