(Adds c.bank reaction, adds regional context, jobless data)
By Marek Petrus
PRAGUE, Dec 10 (Reuters) - Czech annual inflation rose to a six-year high of 5 percent in November, fanning expectations of further interest rate hikes next year and boosting the crown to an all-time peak.
Consumer prices rose 0.9 percent in November from October, the statistics bureau said on Monday, more than double the market forecast of 0.4 percent.
The annual inflation rate rose to its highest since August 2001 from 4.0 percent a month earlier, exceeding both the 4.5 percent market forecast and the 3.6-4.2 percent projection by the central bank (CNB).
"Inflation is blowing up," said Miroslav Plojhar, economist at JPMorgan in London.
The upside surprise came on the back of a 4.0 percent monthly surge in food prices, their sharpest gain in nearly 15 years. Fuel prices went up 2.9 percent month-on-month.
The CNB said higher than expected food and fuel prices were the main reasons for the forecast overshooting that pushed the annual rate well above its comfort zone of 1 percentage point either side of a 3 percent target.
CNB policymakers raised the main rate by 25 basis points to a 5-1/2-year high of 3.50 percent <CZCBIR=ECI> in November on concern that buoyant demand makes it easier for retailers and producers to pass the food and energy price rise onto consumers.
Household spending powered the economy to 6 percent growth in the third quarter, the 10th consecutive quarter of expansion at this level or above, according to data released on Friday.
The Czech Republic was the first central European country to report November inflation and analysts said the release boded ill for its neighbours since food prices tend to be correlated across the region. Hungary and Slovakia report on Tuesday, followed by Poland on Thursday.
RATES TO GO TO 4 PCT?
Analysts said inflation pressure coming from food prices was a global phenomenon and beyond a national central bank's control, but the risk of rising shop prices spilling over into inflation and wage expectations warranted a further rate hike.
"At the moment it is too early to raise interest rates again, but in any case monetary policy cannot do without further tightening," said David Marek, chief economist at Patria Finance, who forecast another rate hike in the first quarter.
Rate-setters next meet on Dec. 19.
Most analysts agreed the CNB could wait with more tightening until early next year because the firm crown helps tame inflation pressures by offsetting a rise in commodity and other import prices.
The crown traded stronger than 26.0 per euro for the first time ever on Monday, firming about half a percent on the day to an all-time high of 25.933 per euro <EURCZK=>. Forward money market rates <CZKFRA> jumped as much as 10 basis points.
Separate release showed end-November unemployment rate dipped to a new decade low of 5.6 percent, adding support to policymakers' concern that the tight labour market could result in unwanted wage pressures if workers demand bigger pay hikes.
Further increases in electricity, gas and other energy costs as well as a tax increase and the introduction of healthcare fees are expected to boost inflation 6 percent early next year.
"We expect inflation to be on the high side throughout 2008. We see an increasing risk that high inflation will affect wage increases," said Istvan Zsoldos at Goldman Sachs, who sees rates rising to 4 percent next year, in line with market expectations.
(For INSTANT VIEW of inflation data, click on [])
((prague.newsroom@reuters.com; +420 224 190 477; Reuters Messaging: marek.petrus.reuters.com@reuters.net))
Keywords: CZECH ECONOMY/
