PRAGUE, Nov 9 (Reuters) - Czech consumer prices fell by 0.2
percent in October from September, putting the annual inflation
rate at 2.0 percent, below market expectations, and spot on the
central bank's inflation target.
The Czech statistics office said on Tuesday the monthly drop
was mainly due to a decline in prices of food, beverages,
tobacco and holiday packages.
In its quarterly forecast, the central bank saw October
annual inflation at 2.2 percent, same as the median prediction
by analysts in a Reuters poll.
****************************************************************
KEY POINTS:
(pct change) Oct Sept Oct forecast
month/month -0.2 -0.3 0.1
year/year 2.0 2.0 2.2
Details of October inflation data...............[]
COMMENTARY:
PETR DUFEK, ANALYST, CSOB
"It is better than we expected, mainly because of food.
Nothing changes for the central bank, inflation will remain
close to their target and it might go slightly above the target
only at the beginning of the next year, which depends on
deregulation of prices and other administrative steps.
"As far as rates are concerned, the situation remains calm.
The only risk in the coming months comes from the administrative
steps, we do not have to fear demand-lead inflation."
DAVID MAREK, CHIEF ECONOMIST, PATRIA FINANCE
"Inflation is still holding on the level of the central
bank's inflation target, the bank can be satisfied with the
development.
"Today's result supports the view that interest rates should
certainly remain stable in the coming months, which shifts the
point of rate increase into the second half of the next year."
"Considering the fact that this confirms rate hikes will
come rather later, this could be slightly negative for the crown
and could support a dip in interest rata swaps."
MARKET REACTION:
The Czech crown <EURCZK=> was flat at 24.54 to the euro
immediately after the data.
DETAILS:
- The monthly price drop was mainly due to a 4.8 percent fall in
prices of fruit and a 4.3 percent decline in prices of
vegetables.
- Prices of domestic holiday packages fell by 8.3 percent due to
the end of the summer season.
- Prices of clothing and shoes rose by 1.7 percent and 2.1
percent respectively.
- In food, bread prices rose by 2.9 percent, flour prices grew
by 3.3 percent, milk prices edged up by 2.7 percent and prices
of sugar grew by 2.3 percent.
- The year-on-year price growth was due to a 14.5 percent rise
in fuel prices.
- Prices of food and non-alcoholic beverages and housing were
also key drivers of the year-on-year growth, the statistics
office said.
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 fourth quarter of 2011 and 1.9 percent in the
first quarter of 2012.
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 []
- 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)
