Czech Oct inflation spike boosts rate hike bets

...investors to shorten the odds of an interest rate increase this month.

The consumer price index (CPI) , a broad gauge of inflation targeted by the central bank (CNB), rose 0.6 percent in October from September, above the median forecast of a 0.4 percent gain in a Reuters poll.

Annual inflation surged to 4.0 percent from 2.8 percent in September for the highest rate since January 2002 and above the consensus forecast of 3.8 percent.

The CNB has held interest rates steady since a 25 basis point increase in its main two-week repo rate to 3.25 percent in August and analysts forecast October inflation would spur another hike despite the record strength of the crown.

"I think this number seals an interest rate increase this month," said Pavel Sobisek, economist at UniCredit Global Research. CNB policymakers next meet on rates on November 29.

A separate release showed end-October unemployment fell to a decade low of 5.8 percent of the workforce , beating the market forecast of 5.9 percent after the previous low of 6.2 percent in September.

The tight labour market has also raised inflationary concerns at the CNB.

The crown firmed slightly to 26.875 per euro by 0840 GMT from 26.950 just before the release.

Short-term forward-looking money market rates jumped by up to 12 basis points, reflecting an increased probability of a rate hike in November and beyond.

Government debt yields rose by about 2 basis points across the board. (Reporting by Marek Petrus)

Keywords: CZECH ECONOMY/INFLATION

[PRAGUE/Reuters/Finance.cz]