(Adds quotes, unemployment, inflation outlook, updates prices)
By Jan Lopatka
PRAGUE, Jan 9 (Reuters) - Czech consumer prices rose half a
percent in December on rising food prices, topping market
forecasts of a 0.2 percent gain and increasing the chances of an
interest rate hike in early February.
The Czech Statistical Bureau (CSU) said year-on-year
inflation increased to 5.4 percent from 5.0 percent in November,
reaching its highest since August 2001.
Food prices surged 1.8 percent month-on-month, extending the
recent trend driven by world commodity prices.
The release cemented the analysts' view that a further rise
in the central European country's interest rates was likely soon
following four hikes last year that brought the key two-week
repo rate to a 5-1/2-year high of 3.5 percent.
"From the central bank's point of view the key will be to
convince the public that this is only the result of one-time
influences ... and to keep inflation expectations under
control," said Jan Vejmelek, head of economics and strategy
research at Komercni Banka.
"In our opinion, the central bank should contribute to that
by raising interest rates. We expect a 25 basis point hike at
the February meeting to 3.75 percent."
The central bank next meets on interest rates on Feb. 7.
The crown currency inched higher after the data to a month
high of 25.945 against the euro <EURCZK=>, near a lifetime high
of 25.933 seen in early December, before retreating to 25.960 by
0930 GMT.
Forward rate agreements, showing expected interest rate
levels in the following months, gained 2-5 basis points after
the data.
The strong crown is having a dampening effect on inflation
in the open economy but global commodity prices, strong domestic
demand and preparations for tax hikes taking effect this year
have contributed to a quickening in price growth.
Separate data showed unemployment jumped to 6 percent in
December from 5.6 percent in November, in line with forecasts
that there would be a seasonal rise in the jobless rate.
FURTHER PRICE JUMP EXPECTED
The Czech economy has been growing at an over 6 percent pace
for the third year running, narrowing the central European
country's wealth gap behind western Europe.
Increasingly, the growth has been driven by consumer
spending as employees have reaped the benefit of a strong
business environment.
Inflation is expected to jump further in January, when the
sales tax on food, medicine and other items rose to 9 percent
from 5 percent as part of government economic reforms. Energy,
housing and healthcare prices are expected to add to the
inflation rise.
"Inflation will swing over 6 percent already in January,
when a whole range of goods and services from energy to
television fees rise," said Patrik Rozumbersky, an analyst at
UniCredit.
"Although the price growth will moderate during the year,
this year's average inflation will reach about double the last
year's 2.8 percent," he said in a report, adding that he
expected interest rates at four percent by July.
(Details of December inflation data...............[]
INSTANT VIEW on inflation........................ []
Details of December jobless data..................[])
(Reporting by Jan Lopatka; editing by Stephen Nisbet)
