INSTANT VIEW 4-Czech March CPI above fcast, rates can still drop

                                
 PRAGUE, April 9 (Reuters) - Czech consumer prices rose by
faster-than-expected 0.2 percent in March versus a month
earlier, mainly due to higher fuel prices, data showed on
Thursday. 
                                
 It put the annual inflation rate at a higher-than-expected
2.3 percent. Analysts in a Reuters poll had forecast prices
growing 2.1 percent on an annual basis in March. The figure was
2.0 percent in February.
                                
 The result was near the bottom of the central bank's 2009
target, which is for annual inflation of 3 percent, plus or
minus 1 percentage point.
****************************************************************
KEY POINTS:
(pct change)         March         Feb         March forecast
 month/month          0.2          0.1          0.0
 year/year            2.3          2.0          2.1

 CENTRAL BANK FORECAST: The figure comes above the central
bank's forecast, which envisaged a 1.4 percent annual rate for
March in its quarterly projection made in February. 
 
 Details of March inflation data.................[ID:nPRA002500]
 Details of March jobless data...................[ID:nPRA002492]

- The monthly price growth was mainly due to an increase in fuel
prices, which rose 2.4 percent.
- Food prices rose mainly due to a 16.6 percent growth in prices
of bananas and 11.1 percent growth in prices of potatoes.
                                
 
                                
 COMMENTARY:
                                
 HELENA HORSKA, ANALYST, RAIFFEISENBANK
                                
 "While Germany faces a steep slowdown in inflation, there
was an unexpected rise in March consumer prices in the Czech
Republic.
                                
 "The Czech Republic faces a similar problem as the UK where
prices rose too, while elsewhere in Europe they drop."
                                
 "Recession has not been reflected in prices yet. On the
contrary, goods for which there is a high demand during the
recession, become more expensive (cigarettes, alcohol).
                                
 "A reduction in interest rates by the central bank will
likely be postponed in this situation."
                                
 
                                
 DAVID MAREK, CHIEF ECONOMIIST, PATRIA FINANCE:
                                
 "In the coming months inflation will fall, it is possible it
will near zero, and under certain circumstances we can talk
about the risk of deflation in the Czech economy. 
                                
 So the room still exists for lowering interest rates after
the crown exchange rate calms down. The central bank may use it
already in May."
                                
 
                                
 RADOMIR JAC, CHIEF ANALYST, GENERALI PPF ASSET MANAGMENT
                                
 "The overall March number is 0.9 percentage points above the
latest forecast of the Czech central bank. It is quite
unpleasant situation for central bankers: data from real
economy, such as exports or unemployment to mention the most
recently released statistics, are in support of a slight
interest rate cut while developments of inflation are pointing
to stable interest rates."
                                
 "The decisive factor will be the Czech crown in the end. We
have a 25 basis point rate cut as our baseline scenario for the
May meeting of Czech central bank but inflation statistics
itself will be a factor supporting stable rates."
                                
 
                                
 JAROMIR SINDEL, CHIEF ECONOMIST, CITIBANK
                                
 "The number is higher than expected by the market but the
factors that caused it were in line with expectations, which
means mainly higher fuel prices due to the weak crown and the
price of oil."
                                
 
                                
 MARKET REACTION:
                                
 Crown marginally weaker at 26.540 to the euro <EURCZK=> from
26.480 ahead of the data.
                                
 
                                
 BACKGROUND:
- The central bank decreased the key two-week repo rate by 50
basis points to 1.75 percent <CZCBIR=ECI> on Feb. 5.
- Report on last Czech c.bank rate decision.........[ID:nL54762]
                                
               [ID:nL5536584] [ID:nPRA002354] [ID:nPRG001229]
- 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 1.4 percent in first quarter of 2010 and 2.1 percent in the
second quarter of 2010. Consumer inflation net of impact of
indirect tax changes is seen at 1.4 percent in the first quarter
of 2010 and 2.1 percent in second quarter of 2010.

LINKS:
- For further details on March 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]
- Overview of Czech macroeconomic indicators            [CZ/ECI]

- 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)