INSTANT VIEW 3-Czech Sept CPI fall bigger than forecast

    PRAGUE, Oct 9 (Reuters) - Czech consumer prices fell by a 
sharper than forecast 0.7 percent in September from August, 
squeezing the annual inflation rate to 2.7 percent, below the 3 
percent midpoint of the central bank target. 
 
KEY POINTS: 
(pct change)          Sept        Aug          Sept forecast 
 month/month         -0.7         0.2         -0.5 
 year/year            2.7         3.1          2.9 
 
 (Details of Sept inflation data.................[ID:nPRA000966] 
 (End-Sept unemployment figures..................[ID:nPRA000967] 
 
- The monthly fall was driven by a seasonal 18.2 percent drop in 
holiday prices. 
- Fuel prices down 2.6 percent month-on-month, the first decline 
after five consecutive months of gains. 
- Food prices down 0.2 percent, mainly on falling vegetable and 
fruit prices. 
- Other categories of the consumer price index (CPI) mostly show 
small changes. 
 
COMMENTARY: 
    MIROSLAV PLOJHAR, CHIEF ECONOMIST, CITIBANK, PRAGUE 
    "We expect CPI to drop towards 2 percent in October due to 
the effect of falling natural gas prices. 
    "Low CPI in the fourth quarter will lower pressure for 
higher Czech rates. We expect additional an 50 basis point hike 
in Czech Republic during 2007 the expectations shown in FRAs of 
a 75-100 basis point hike. 
    "The figure is neutral for the Czech currency." 
     
    DAVID MAREK, CHIEF ANALYST, PATRIA FINANCE 
    "This number could tame expectations of a fast interest rate 
increase." 
 
MARKET REACTION: 
- Crown ticks lower to 28.235 per euro <EURCZK=> by 0710 GMT 
from 28.220 just before. Debt yields mixed and little changed. 
 
BACKGROUND: 
- The central bank increased the key two-week repo rate by 25 
basis points to 2.50 percent <CZCBIR=ECI> last month. Five out 
of seven policymakers voted for the hike, while the remaining 
two wanted no rate change. 
- Report on last Czech c.bank rate decision      [ID:nL27342627] 
                                 [ID:nL27365976] [ID:nPRA000961] 
- 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 bank's newly-updated quarterly inflation prediction sees 
consumer prices rising 2.8-4.2 percent year-on-year in June 2007 
and 3.3-4.7 percent in December 2007. 
 
LINKS: 
- For further details on September 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       <ECONCZ> 
- 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                <CZKVIEW> 
- Czech money guide                                      <CZK/1> 
- Czech benchmark state bond prices                   <0#CZBMK=> 
- Czech forward money market rates                      <CZKFRA> 
 
 ((Writing by Marek Petrus; Editing by Chris Pizzey; 
prague.newsroom@reuters.com; Reuters Messaging: 
marek.petrus.reuters.com@reuters.net; +420 224 190 477)) 
  Keywords: ECONOMY CZECH INFLATION