Czech Jan CPI rise lags fcasts, below cbank target

...likely to cement expectations of flat credit costs in the next few months.

The consumer price index (CPI), the broad gauge of inflation targeted by the central bank (CNB), rose 1.0 percent month-on-month , lagging the 1.6 percent median forecast in a Reuters poll of analysts.

This caused annual price growth to slow unexpectedly to 1.3 percent from 1.7 percent in December , the statistics office reported.

The result wrongfooted the market's consensus forecast of a quickening to 1.9 percent.

The headline figure slid below the CNB's tolerance range of one percentage point either side of a 3 percent target, giving markets little reason to expect a rush into further policy tightening in an economy growing at 5-6 percent a year.

Last month, the CNB held the key rate at 2.50 percent, the lowest level in the European Union, but minutes from the meeting surprisingly showed some board members did not even rule out a future rate cut, citing numerous inflation risks on both sides.

Increases in government-regulated prices made up 0.6 percentage point of the headline January number, the statistics office said, mainly due to past hikes in tobacco tax and higher electricity costs, water rates, rents, and television fees.

Regulated natural gas prices fell, as did fuel prices.

The January data was first published following an update to the basket of goods and services used to calculate the CPI, which rebased the index to 2005 and raised the weight of housing as well as transport costs at the expense of foodstuffs.

((For INSTANT VIEW of inflation data, double click on the code in brackets: [ID:nL14928952]))

[PRAGUE/Reuters/Finance.cz]