(refiles, changing month in dateline)
* Inflation at nearly 6 year low
* Deflation unlikely thanks to weaker crown
* CPI data [] Unemployment data []
By Jana Mlcochova
PRAGUE, Aug 10 (Reuters) - Czech consumer inflation
<CZCPI=ECI> <CZCPIY=ECI> fell steeper than expected in July with
prices declining across the board and some analysts said it
could change the market's view the August cut in interest rates
was the last one in the current easing cycle.
Separate data showed the economy continued shedding jobs in
July, with the rate of unemployment rising to more than a three
year high.
Prices dipped by 0.4 percent in July from June, putting the
annual inflation rate at 0.3 percent, the lowest level since
September 2003.
Both the annual and the monthly reading came in much lower
than expected with analysts predicting 0.6 percent and -0.1
percent respectively.
Inflation was far below the central bank's 2009 target of 3
percent +/- 1 percentage point reflecting a steep drop in the
economy which saw a worst ever contraction of 3.4 percent in the
third quarter.
Faltering demand for the country's products from the West
crippled exports, the backbone of the fast growth in past years.
"The prospects are ripe for Czech inflation to dip into
outright negative over the coming months. Such a development
would likely trigger one last rate cut from the CNB over the
coming quarter before its easing cycle is finished," said Tatha
Ghose, an analyst at Commerzbank.
But some said the lower than expected numbers are unlikely
to elicit another rate reduction as rates were already very low
and the drop in prices was driven by a decline in food prices
which are not affected by monetary policy moves.
"I think that now there is no space for further rate cuts
because we can see more and more positive surprises in the world
economy," said David Marek, a chief economist at Patria Finance.
Most analysts said the economy was not threatened with
deflation or a protracted drop in prices thanks to a weaker
exchange rate from a year ago, although they could not rule out
prices would keep falling for the next few months.
The crown <EURCZK=> firmed after the data along with
regional peers and was at 25.804 per euro at 0918 GMT, or 0.13
percent stronger from Monday's close.
The unit has weakened by 5.7 percent since the beginning of
August last year.
A separate set of data showed the July unemployment rate
rose in line with expectations to 8.4 percent, the highest level
since March 2009, and analysts said the rate could peak at 10
percent in the beginning of the next year as it reacts to the
first signs of an economic recovery with a delay.
The total number of unemployed in July rose by 21,764 from
485,319 in June. Year-on-year the number rose by 175,261, the
Labour and Social Affairs Ministry said.
