WRAPUP 1-Food price shocks hit CEE, cbanks on alert

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PRAGUE, Sept 11 (Reuters) - A long-expected food price shock finally showed up in east European inflation data in August and will keep central banks on high alert to act quickly to contain it.

Data released from Hungary, Romania and Slovakia on Tuesday and from the Czech Republic on Monday showed a uniform acceleration in food price growth after a hot, dry summer with drought in some areas led to poor harvests across most of the region.

Analysts said price pressures would continue to build as the effects of low crop yields work their way into the food processing industry.

"The August food price upside is only the beginning of the story...the question is the extent to which policymakers react to headline inflation and the extent to which this poisons core inflation," said Martin Blum, head of emerging markets research at Unicredit in Vienna.

"Our view remains that countries with stronger economic growth and tighter output gaps are more at risk of food price inflation spilling over into core inflation and more hawkish central banks."

Blum said he thinks Poland, which will report August data on Thursday, and Romania are most at risk for inflation spillover.

Romania's annual inflation rate jumped to 5.0 percent in August from July's 4.0 percent. The median forecast for August inflation in Poland is 1.9 percent, which is seen rising to 2.8 percent in December, according to a Reuters poll of analysts.

HUNGARY TO DELAY EASING?

Hungary's inflation slowed less than expected in August due to food price rises with annual headline consumer price inflation at 8.3 percent from 8.4 percent in July. But this exceeded analysts' expectations for an 8.1 percent rise.

The rise in food prices has been a concern for both the government and the central bank with the agriculture ministry estimating food prices could go up by as much as 20 percent.

Hungary's inflation peaked at 9 percent in March but is set to slow sharply from September as the impact of government measures a year earlier get excluded from base figures.

"In the coming month there may be some room for a rate cut, but it should be noted with global credit conditions continuing to worsen, there is clearly a risk that the forint could weaken further. If that happens, it will close the door for cuts this year," said Lars Christensen, senior analyst at Danske Bank.

Analysts at Goldman Sachs noted that while Czech August CPI of 2.4 percent was 0.2 percentage points below their forecast, "the details point to increasing inflation risk".

"We expect the CNB (central bank) to continue increasing rates, to 4.0 percent by around Q1 (2008) from the current 3.25 percent," they said in a note to investors.