PRAGUE, Feb 9 (Reuters) - Czech consumer prices rose by much
lower-than-expected 0.7 percent in January from December, and
the annual inflation rate was lower than market expectations at
1.7 percent, falling below the central bank's 2 percent
inflation target.
The Czech statistics office said on Wednesday the slowdown
in price growth took place in most categories in its basket.
In its quarterly forecast, the central bank saw January
annual inflation at 2.0 percent. Analysts polled by Reuters had
predicted a 2.3 percent year on year rise, the same rate as in
December.
The montly rise was also below analysts' estimates. The rise
was mainly by a rise in energy and fuel prices.
****************************************************************
KEY POINTS:
(pct change) Jan Dec Jan forecast
month/month 0.7 0.5 1.2
year/year 1.7 2.3 2.3
Details of January inflation data...............[]
MARKET REACTION:
The crown weakened to a week low of 24.12 to the euro
<EURCZK=> after the data from 24.06, and half a percent down on
the day.
COMMENTARY:
PETR DUFEK, DIRECTOR OF MACRO ANALYSIS, CSOB
"January inflation brings big surprise. After all worries
about growth of rents after de-regulation, it is being shown
that rents only grew symbolically.
"That is the main reason why inflation lagged our
expectations. Food prices took a breather as well.
"It is apparent that inflation will develop better than we
had expected. That strengthens the conclusion that there is no
rush with (raising) interest rates."
RADOMIR JAC, CHIEF ANALYST, GENERALI PPF ASSET MANAGEMENT
"Of course, this indicates that the CNB board may be now
more comfort with keeping its monetary policy rates at record
low levels: not only in March but most likely also in further
months to come.
"If we look at the January data, we see lower-than-expected
inflation in food prices, household energy but also in
transport, restaurants or clothing and footwear. In other words,
the disinflationary surprise seems to be quite broad-based.
This is a dovish signal for monetary policy expectations and
bullish news for the CZK bond market."
PAVEL MERTLIK, ANALYST, RAIFFEISENBANK
"An attack of regulated prices and food prices on the price
level which we had expected along with the market... has not
materialised so far."
"Growth in regulated prices was lower than expected and food
prices on the other hand tended to decline. January sales had a
positive effect on the price level, this was probably given by
weak sales during Christmas and retailers were left with a lot
of seasonal goods."
PAVEL SOBISEK, CHIEF ECONOMIST, UNICREDIT, PRAGUE
"We are below the bottom end of market expectations, and
that number is closer to the CNB's expectations than the market
expectations, the number certainly does not show any acute need
to increase interest rates. The scenario of increases in March
is therefore likely to be deferred."
DAVID MAREK, CHIEF ECONOMIST, PATRIA FINANCE
"The result is below estimates and the first thought that
comes is that this could lead to moderation of thoughts about a
quick rise in interest rates and it mitigates arguments of hawks
on the banking board."
"Inflation may rise to 2 percent or above 2 percent.
Monetary policy relevant inflation should also converge to that
level."
"But in any case, despite the rise in food and fuel prices
as well as prices of regulated rents, the Czech Republic
maintains reasonably low inflation and it does not look like
inflation should be a significant macroeconomic risk."
DETAILS:
- The monthly price growth was mainly due to a 4.8 percent
increase in electricity prices and 1.7 percent rise in natural
gas prices. Unleaded fuel prices rose to a record high.
- Monthly prices of domestic holiday packages rose by 2.7
percent due to the end of the winter season.
- Monthly prices of clothing and shoes dipped by 3.6 percent and
4.6 percent respectively.
- In food, monthly bread prices dropped 2.7 percent.
- The year-on-year price growth was due to food prices, with a
10.6 percent rise in baked goods.
- Year-on-year rise in rents reached 2.3 percent, including
regulated rents rise of 6.3 percent.
BACKGROUND:
- The central bank decreased the key two-week repo rate by 25
basis points to 0.75 percent <CZCBIR=ECI> on May 6.
- Report on last Czech c.bank rate decision......[]
[] [] []
- The central bank (CNB) targets headline inflation, which it
seeks to keep at 2 percent year-on-year, allowing for
fluctuations by plus/minus one percentage point from this level.
- The CNB's quarterly prediction sees consumer price inflation
of 2.0 percent in first quarter of 2012 and 2.1 percent in the
second quarter of 2012.
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 <ECONCZ>
- Instant Views on other Czech data []
- Overview of Czech macroeconomic indicators []
- Key data releases in central Europe []
- 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 Jana Mlcochova)
