(Repeats story published late on Wednesday)
By Jan Lopatka
PRAGUE, Jan 9 (Reuters) - Czech consumer prices jumped by a
much higher-than-expected half a percent in December on rising
food prices, sending the crown currency to a record high and
increasing the chances of an interest rate hike in February.
The Czech Statistical Bureau (CSU) said year-on-year
inflation accelerated to 5.4 percent from 5.0 percent in
November, reaching its highest since August 2001. The market had
expected a 0.2 percent monthly and 5.2 percent annual rise.
Food and fuels have contributed to an inflation rise across
central Europe, reflecting global commodity price growth, and
central banks in the region have already tightened monetary
policy screws.
Czech food prices surged 1.8 percent in December alone.
The figures cemented analysts' view that a further rise in
interest rates was likely soon, following four hikes last year
that brought the Czech two-week repo rate to a 5-1/2-year high
of 3.5 percent, 50 basis points below the main euro zone rate.
"From the central bank's point of view the key will be to
convince the public that this is only the result of one-time
influences ... and to keep inflation expectations under
control," said Jan Vejmelek, head of economics and strategy
research at Komercni Banka.
"In our opinion, the central bank should contribute to that
by raising interest rates. We expect a 25 basis point hike at
the February meeting to 3.75 percent."
CENTRAL BANK WATCHING
The central bank (CNB) said year-on-year inflation came 1.5
percentage points above its October quarterly forecast, the key
driver for policy, mainly due to the food and fuel prices.
"The deviation from the forecast recorded in November has
grown further," it said in a statement.
But the CNB added its own, closely-watched reading of core
inflation, as well as regulated prices and the impact of tax
changes which are outside the scope of its policy, came roughly
in line with the October prediction.
The CNB aims to keep inflation within a band of 1 percentage
point either side of a 3 percent target. It will next meet on
interest rates on Feb. 7.
The crown rose after the data and briefly scaled a record
high versus the euro <EURCZK=> of 25.931 in late trading, up
from 26.075 on Tuesday and the previous high of 25.933 set in
early December. The unit then slid back to 25.945 at 1536 GMT.
Forward rate agreements, showing expected interest rates in
the following months, gained 2-12 basis points after the data.
The strong crown dampens inflation but commodity prices,
strong domestic demand and preparations for tax hikes taking
effect this year have contributed to higher price growth.
Separate data showed unemployment jumped to 6 percent in
December from 5.6 percent in November, in line with forecasts
that there would be a seasonal rise in the jobless rate.
The Czech economy has been growing at an over 6 percent pace
for the third year running, narrowing the central European
country's wealth gap behind western Europe.
Increasingly, the growth has been driven by consumer
spending which may lead to higher prices.
Inflation is expected to jump further in January, when the
sales tax on food, medicine and other items rose to 9 percent
from 5 percent as part of economic reforms. Energy, housing and
healthcare prices are expected to add to the inflation rise.
"Although the price growth will moderate during the year,
this year's average inflation will reach about double the last
year's 2.8 percent," said Patrik Rozumbersky, an analyst at
UniCredit who expects interest rates at four percent by July.
Details of December inflation data................[]
INSTANT VIEW on inflation........................ []
Details of December jobless data..................[]
(Editing by David Christian-Edwards)
