INSTANT VIEW 3-Czech Nov PPI surges to 2-1/2-year high

...high of 5.4 
percent from October's 4.4 percent. 
    Separately, the statistical bureau said agriculture producer 
prices jumped 3.3 percent in November from October for a 26.9 
percent year-on-year increase, up from October's 24.4 percent. 
    The data were likely to boost expectations that the central 
bank could consider raising interest rates next week, hot on the 
heels of a 25 basis point rise to 3.5 percent in November. 
**************************************************************** 
KEY POINTS: 
(change in percent)       Nov         Oct       Nov forecast 
 month/month              0.7        0.4        0.4 
 year/year                5.4        4.4        5.0 
 
 (For full table of data...........................[nPRA001667]) 
 
- The monthly gain in the producer price index (PPI) led by a 
3.0 percent increase in the price of food products and a 7.8 
percent rise in oil prices. 
 
COMMENTARY: 
    PETR DUFEK, ANALYST, CSOB BANK, PRAGUE 
    "This is a very bad number showing that the food price shock 
is ongoing. 
    "Monetary policy is facing a dilemma of rising inflation, 
which it can hardly influence, and a strong crown, which is 
undoubtedly being supported by interest rate increases to climb 
to new all-time highs." 
     
    HELENA HORSKA, ANALYST, RAIFFEISENBANK, PRAGUE 
    "Price growth is now a global phenomenon. Not even the 
dramatic firming in the crown will prevent prices from rising. 
The market could respond to this number by increasing 
expectations about a rise in CNB (central bank) interest rates. 
    "In my view, the CNB is in the grip of rising inflation and 
a strong crown, and it is uncertain how it will decide at its 
December meeting. Should it at least try to show an effort to 
rein in inflation expectations, it should raise interest rates 
immediately. On the other hand, it is already too late to quell 
inflation, and a further rise in interest rates could spark 
renewed firming in the crown." 
 
    JAN VEJMELEK, HEAD OF ECONOMIC AND STRATEGY RESEARCH, 
KOMERCNI BANKA 
    "Inflationary factors remain strong, even though they are 
not of the monetary policy nature. We expect the CNB (central 
bank) to raise interest rates next week, despite the strong 
crown. In our view, the reason is the need to clamp down on 
already rising inflation expectations." 
 
MARKET REACTION: 
- Crown unmoved at 26.290 per euro , slightly weaker on 
the day. 
 
BACKGROUND: 
- Industrial PPI and agriculture producer prices are watched 
closely by the markets as leading indicators for consumer 
inflation which is targeted by the Czech central bank (CNB). 
 
- November consumer inflation                    [ID:nL10470437] 
                                  [ID:nL10617049] [ID:nL1062697] 
- October industrial output figures              [ID:nL11393445] 
- Report on last Czech c.bank rate decision      [ID:nL29206268] 
                                  [ID:nPRA001631] [ID:n29679528] 
  
LINKS: 
- For further details on November producer prices and past data, 
Reuters 3000 Xtra users can click on the statistical bureau's 
Website: 
    http://www.czso.cz/eng/csu.nsf/kalendar/2004-ipc 
 
- For LIVE Czech economic data releases, click on        
- 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                 
- Czech money guide                                       
- Czech benchmark state bond prices                    
- Czech forward money market rates                       
 
 (Writing by Marek Petrus; editing by Tony Austin) 
  
  Keywords: CZECH PRICES/  
    

[PRAGUE/Reuters/Finance.cz]