INSTANT VIEW 4-Czech CPI jumps to near 6-year high in October

    PRAGUE, Nov 8 (Reuters) - Czech consumer prices rose by a 
sharper than expected 0.6 percent in October from November, 
lifting the annual inflation rate to a near six-year high of 4.0 
percent from 2.8 percent a month earlier. 
    The surge fuelled expectations a 25 basis point interest 
rate increase as early as this month. 
**************************************************************** 
KEY POINTS: 
(pct change)          Oct          Sept         Oct forecast 
 month/month          0.6         -0.3          0.4 
 year/year            4.0          2.8          3.8 
 
 CENTRAL BANK FORECAST: The figure comes in at the top end of 
the central bank's forecast which envisaged a 3.6-4.0 percent 
annual rate for October in its projection unveiled last month. 
 
 Details of October inflation data..................[nPRA001597] 
 Details of October jobless data....................[nPRG000577] 
 Details of September industrial output.............[nPRA001598] 
 
- The year-on-year inflation rate is the highest since January 
2002. 
- The monthly gain driven by a sharp rise in food prices, and 
increases in housing and utility prices. 
- Food prices up 2.3 percent month-on-month. 
- Prices for housing and utility services such as water and 
energy supplies rise 0.6 percent month-on-month, mainly on the 
back of a 4.7 percent increase in natural gas prices. 
- Clothing and footwear prices rise 1.2 percent month-on-month 
due to a seasonal increase in winter apparel prices. 
- Fuel prices dip 0.1 percent on average on the month. 
 
COMMENTARY: 
    MICHAL BROZKA, ANALYST, RAIFFEISENBANK, PRAGUE 
    "Inflation suprised on the upside only slightly. The 
perceived food price growth was confirmed. 
    "Monetary policy-makers should not be surprised. With the 
crown this strong and uncertainty about external developments, 
they do not need to rush with an interest rate increase." 
     
    PETR DUFEK, ECONOMIST, CSOB BANK, PRAGUE 
    "The inflation number came in above our expectations... 
Behind this number are mainly food prices, which are going up in 
all neighbouring countries, so this is currently a common 
phenomenon in the whole of Europe. 
    "Today's number increases the likelihood of an interest rate 
increase by the CNB (central bank) as early as this month." 
     
    VOJTECH BENDA, SENIOR ECONOMIST, ING WHOLESALE BANKING, 
PRAGUE 
    "The CPI acceleration above market consensus ... will likely 
have a significant psychological effect on those bank board 
members who are still hesitating about implementing further rate 
hikes. In light of today's CPI data, an increase in rates by 25 
basis points already in November seems more likely."      
     
    PAVEL SOBISEK, ECONOMIST, UNICREDIT GLOBAL RESEARCH, PRAGUE 
    "I think this number seals an interest rate increase this 
month. 
    "However, I do not want to overestimate the surprise. A 
sharp rise in the annual rate had been expected, but the 
surprise lies in the difference of two-tenths of a percentage 
point between the actual figure and expectations of both the 
markets and the central bank. It looks like the biggest part of 
this comes from a faster than expected rise in food prices. 
 
MARKET REACTION: 
- Crown firms slightly to 26.900 per euro <EURCZK=> by 0818 GMT 
from 26.950 just before the release. Government debt yields rise 
by up to 4 basis points, while forward-looking money market 
rates <CZKFRA> jump by up to 12 basis points. 
 
BACKGROUND: 
- The central bank has held interest rates steady since hiking 
the key two-week repo rate by 25 basis points to 3.25 percent 
<CZCBIR=ECI> in August. 
- Report on last Czech c.bank rate decision      [ID:nL25710600] 
  [ID:nPRA001568] [ID:nPRA001584] [ID:nPRA001585] [ID:n25439215] 
- 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 
4.4-5.8 percent year-on-year in September 2008 and 3.1-4.5 
percent in March 2009, consumer inflation net of impact of 
indirect tax changes rising 2.5-3.9 percent year-on-year in 
September 2008 and 2.6-4.0 percent in March 2009. 
 
LINKS: 
- For further details on October 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> 
 
 (Reporting by Jan Lopatka, Editing by Alan Crosby)  
 ((prague.newsroom@reuters.com; +420 224 190 477; Reuters 
Messaging: jan.lopatka.reuters.com@reuters.net)) 
  Keywords: CZECH ECONOMY/INFLATION