INSTANT VIEW 2-Czech Jan annual CPI slows, wrongfoots fcasts

    Czech consumer prices rose by a 
less than expected 1.0 percent in January from December, causing 
the annual inflation rate to wrongfoot forecasts of a rise and 
ease to 1.3 percent from 1.7 percent a month earlier. 
    Price growth slid well below the 2 percent bottom of the 
tolerance band of the central bank's target with 3 percent 
mid-point, which was likely to re-inforce market expectations of 
flat interest rates in the near-term. 
 
KEY POINTS: 
(pct change)          Jan         Dec          Jan forecast 
 month/month          1.0         0.2           1.6 
 year/year            1.3         1.7           1.9 
 
 (Details of Jan inflation data..................[ID:nPRA001151] 
 
- The statistics office says regulated prices account for 0.6 
percentage point of the 1.0 percent monthly gain. 
- The monthly rise comes mainly on the back of a 3.8 percent 
increase in government-regulated prices, reflecting rising 
electricity charges, rents, water and sewage rates, TV fees and 
a delayed impact of tobacco tax hike. Natural gas prices, also 
set by state regulator, fell. 
- Market prices rise 0.4 percent on the month, due mainly to a 
1.6 percent jump in food prices, which is partly offset by a 2.1 
percent fall in fuel costs and a seasonal drop in clothing and 
footwear prices. 
- The data are based on a newly updated the basket of goods and 
services used to calculate the Consumer Price Index (CPI). The 
statisticians rebased it to 2005 and raised the weight of 
housing as well as transport costs at the expense of foodstuffs. 
 
COMMENTARY: 
    SILJA SEPPING, ECONOMIST, LEHMAN BROTHERS, LONDON 
    "We still believe that inflationary pressures are likely to 
remain low in the first six months of the year and project CPI 
inflation to stay at around 2 percent, well below the CNB's 3 
percent target." 
 
MARKET REACTION: 
- Crown slides to 28.215 per euro  from 28.185 just 
before the release. Government debt yields  shed 
between 3-7 basis points. Short-term money market rates  
drop up to 9 basis points. 
 
BACKGROUND: 
- The central bank held the key two-week repo rate steady at 2.5 
percent  in January. 
- Report on last Czech c.bank rate decision      [ID:nPRA001122] 
                                 [ID:nL02157584] [ID:nL25513531] 
- 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 
2.4-3.8 percent year-on-year in December 2007 and 2.8-4.2 
percent in June 2008. 
 
LINKS: 
- For further details on January 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                                       
- Czech benchmark state bond prices                    
- Czech forward money market rates                       
 
 ((Writing by Marek Petrus; Editing by Alan Crosby; 
prague.newsroom@reuters.com; Reuters Messaging: 
marek.petrus.reuters.com@reuters.net; +420 224 190 477)) 
  Keywords: CZECH ECONOMY/INFLATION  
    

[PRAGUE/Reuters/Finance.cz]