PRAGUE, Feb 9 (Reuters) - Czech consumer prices rose by 1.2
percent in January from December, putting the annual inflation
rate at 0.7 percent, lower than market expectations.
The Czech statistics office said on Tuesday the rise was
mainly due to an increase in value-added and excise taxes, which
the office estimated added 1 percentage point to the
month-on-month figure.
The central bank targets inflation at 2 percent +/- 1
percentage point.
It signalled last week that the next move in interest rates
would likely be up, ending a year-and-a-half easing cycle that
brought rates down 275 basis points to a record low of 1
percent. Governor Zdenek Tuma said a hike could be expected in
the second half of the year.
In its quarterly forecast, the bank saw January annual
inflation at 0.9 percent, while analysts in a Reuters poll saw
it at 1.0 percent.
****************************************************************
KEY POINTS:
(pct change) Jan Dec Jan forecast
month/month 1.2 0.2 1.5
year/year 0.7 1.0 1.0
Details of January inflation data...............[]
- The monthly price rose was mainly due to a increase in
value-added and excise taxes, adding about 1 percentage point to
the overall figure.
- Housing prices grew by 7.8 percent month-on-month, due to
hikes in state-regulated rents.
- Electricity prices dropped 2.6 percent month-on-month, and car
prices dropped 4.7 percent on the month.
- The growth in food and non-alcoholic beverages prices
continued on a monthly basis, but prices were lower on the year.
- Year-on-year prices of bread fell by 15.5 percent and milk
prices dropped 8.9 percent.
COMMENTARY:
HELENA HORSKA, ANALYST, RAIFFEISENBANK
"Inflation is being strangled by weak household demand;
inflation pressures in the economy are missing. Without the
increase of indirect taxes, prices in January would have risen
only by 0.2 percent, which would have been probably the
lowest-ever growth in January."
"The central bank counted on a slightly higher growth."
"There is no need to hurry with growth in interest rates;
there will be enough time in the second half of the year."
PETR DUFEK, ANALYST, CSOB
"These are very good numbers even from the central bank's
point of view. It means that the central bank does not have to
deal with current inflation, which is driven by taxes and
deregulation. The impact of market prices is zero or
deflationary.
"There is no recovery of domestic demand in sight, so we do
not have to worry about prices this year."
DAVID MAREK, CHIEF ECONOMIST, PATRIA FINANCE
"The main driver, as expected, is the change of indirect
taxes -- VAT and excise taxes. On the other hand, we can see
positive impact from lower electricity prices."
"Taken all together it is positive news and should support
view that interest rates should stay low for at least two
quarters."
MARKET REACTION:
Crown a touch weaker at 26.145 to the euro <EURCZK=> from
26.125 ahead of the data.
BACKGROUND:
- The central bank decreased the key two-week repo rate by 25
basis points to 1.00 percent <CZCBIR=ECI> on December 16.
- 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 first quarter of 2011 and 2.1 percent in the
second quarter of 2011.
LINKS:
- For further details on January 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 Jason Hovet)
