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INSTANT VIEW 2-Czech prices dip in Sept, in line with fcast

PRAGUE, Oct 9 (Reuters) - Czech consumer prices dipped by 0.1 percent in September versus a month earlier, bringing annual inflation to 3.4 percent, the Statistics Office said on Tuesday.

Both the monthly result and the annual rate were exactly in line with predictions in a Reuters poll. Analysts said the data could further strengthen the central bank's resolve to ease monetary policy after it cut interest rates to a record low last month.

The annual rate, influenced by a sales tax hike in January, was just below the central bank's forecast of 3.5 percent but above the bank's target range of 2 percent plus/minus one percentage point.

The statistics office said the data was influenced by a drop in prices in the sector of recreation and culture, while prices in transportation, clothing and footwear rose. **************************************************************** KEY POINTS: CONSUMER INFLATION (pct change) Sept Aug Sept fcast month/month -0.1 -0.1 -0.1 year/year 3.4 3.3 3.4

Details of September data.................

COMMENTARY:

VOJTECH BENDA, SENIOR ECONOMIST, ING COMMERCIAL BANKING

"The key drivers of headline inflation remain the same as in previous months: energy and food prices and previous hikes of indirect taxes."

"Core inflation, (which is) CPI excluding those items, remains flat, close to zero. The domestic economic environment still remains disinflationary: retail sales are soft, real wages are declining, and consumer sentiment is heading south."

"The central bank policymakers have no strong arguments to reassess their dovish stance. It seems likely the CNB board will continue with further policy loosening and another cut on interest rates, close to zero, until the end of the year seems likely."

RADOMIR JAC, CHIEF ANALYST, GENERALI PPF ASSET MANAGEMENT

"Headline inflation is slightly above our own forecast but this was caused mainly by the development of food, household energy and fuel prices. Importantly, we continue to see an absence of demand-led pressures in the Czech economy and in the structure of inflation data."

"Inflation remains slightly below forecast of the Czech central bank's, and the central bank is likely to maintain its view that anti-inflationary risks to its forecast prevail."

"Nevertheless, the Czech central bank has already only very narrow space for any further relaxation of its interest rate policy, and any further easing is actually not expected for the near term, at least at the moment. Therefore, the market impact of the September inflation release is likely to be limited."

DAVID MAREK, CHIEF ECONOMIST, PATRIA FINANCE

"The biggest influence was the rise in the price of crude which led to an increase of fuel prices. However, this was compensated for by a drop in other parts, mainly a seasonal drop in prices of recreation."

"Core inflation remains moderately negative. There is no reason for the central bank to change its stance. It can maintain very loose monetary policy and if needed it can even use FX interventions."

DETAILS:

- The monthly development was affected by a 13.2 percent drop in the prices of holiday packages due to an end of the season. - Prices of mobile phones dropped by 1.3 percent. - Food prices were driven lower by a 1.3 percent drop in the price of eggs and cheese, a 1.5 percent drop in the price of yoghurts and a 5.6 percent decline in the price of butter. - On the contrary, prices in transportation grew, driven by a 2.6 percent monthly rise in fuel prices. - The year-on-year acceleration from August's 3.3 percent was mainly due to quickening in the rise of fuel prices to 9.6 percent in September from 6.5 percent in August.

BACKGROUND:

- The central bank (CNB) cut the key two-week repo rate by 25 basis points to 0.25 percent

on September 27, 2012. - Report on last Czech c.bank rate decision......

- The central bank 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 2.3 percent in the third quarter of 2013 and at 2.3 percent in the fourth quarter of 2013. - The central bank next meets on interest rates on November 1.

LINKS:

- For further details on September and other past inflation data, Reuters 3000 Xtra users can click on the Czech Statistical Bureau's website:

- For LIVE Czech economic data releases, click on

- Instant Views on other Czech data

- Overview of Czech macroeconomic indicators

- Key data releases in central Europe

- For Czech money markets data click on

- Czech money guide

- Czech benchmark state bond prices

- Czech forward money market rates

(Reporting by Mirka Krufova and Jana Mlcochova. Editing by Jeremy Gaunt.)

((prague.newsroom@thomsonreuters.com)(+420 224 190 477)(Reuters Messaging: mirka.krufova.thomsonreuters.com@reuters.net))

Keywords: CZECH INFLATION/