INSTANT VIEW 4-Czech August CPI down 0.1 pct mo/mo

                                
 PRAGUE, Sept 8 (Reuters) - Czech consumer prices dipped 0.1
percent in August from July, beating market expectations of
stagnation and putting the annual inflation rate at 6.5 percent,
from 6.9 percent a month earlier, data showed on Monday.
****************************************************************
KEY POINTS:
(pct change)          Aug          July         Aug forecast
 month/month         -0.1          0.5          0.0
 year/year            6.5          6.9          6.6

 CENTRAL BANK FORECAST: The figure comes below the central
bank's forecast, which envisaged a 6.8 percent annual rate for
August in its quarterly projection made in August.

 Details of August inflation data................[ID:nPRA002111]
 Details of August jobless data..................[ID:nPRA002112]

- The monthly price drop was driven mainly by the decline in
food and fuel prices. Potato prices dropped 17.6 percent.
- Tobacco product prices rose 2.9 percent month-on-month,
showing delayed impact of a January tax hike.

COMMENTARY:
 DAVID MAREK, CHIEF ECONOMIST, PATRIA FINANCE      
                                
 "Inflation data is a pleasant surprise as prices fell month
on month."
                                
 "Combined with the crown's weakening it is less likely that
the Czech central bank (CNB) cuts borrowing costs soon."
                                
 "I see another cut at the turn of the year at the earliest."
                                
 
 PETR DUFEK, ANALYST, CSOB
"It is a nice figure that is better than expected due to
lower prices of foodstuff and oil. Inflation is below the
(central bank) forecast. It's positive and we can think about a
future (interest) rate cut, which could occur in the first
quarter next year."
                                
 
 MICHAL BROZKA, ANALYST, RAIFFEISENBANK:
                                
 "September can still bring a slight rise in inflation, as
the cancellation of 50-heller coins may take a small toll,
however the trend of falling inflation should continue. It
should be below 5 percent at the end of the year and below 4
percent at the beginning of 2009.
                                
 "We can expect a further decline of the Czech yield curve,
given the falling inflation and not very encouraging data from
the global economy."
                                
 
MARKET REACTION:
                                
 The crown trades firmer from Friday as regional currencies
gain following the drop of the dollar. Crown at 24.86 to the
euro <EURCZK=> after the price data, showing no reaction to the
figures.
                                
 
BACKGROUND:
- The central bank decreased the key two-week repo rate by 25
basis points to 3.50 percent <CZCBIR=ECI> on Aug. 7.
- Report on last Czech c.bank rate decision.........[ID:nL74314]
                                
                               [ID:nL7705441] [ID:nPRA002063]
- The central bank (CNB) targets headline inflation which it
seeks to keep at 3 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 3.4 percent in second quarter of 2009 and 2.5 percent in the
fourth quarter. Consumer inflation net of impact of indirect tax
changes is seen at 3.3 percent in the second quarter of 2009 and
2.5 percent in fourth quarter.

LINKS:
- For further details on August 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                 [CZ/INSTANT]
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- Key data releases in central Europe    [CEE-CONVERGENCE-WATCH]
- 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; Editing by Jan Lopatka)