UPDATE 1-Czech annual inflation falls to zero in June, lowest since 2009

Wed Jul 9, 2014 4:21am EDT

(adds analyst comments, details on prices, crown exchange rate)
    By Robert Muller
    PRAGUE, July 9 (Reuters) - Czech consumer prices stagnated
in June, putting the year-on-year inflation rate at zero, below
forecasts in a Reuters poll and the lowest annual rate since
October 2009, statistics office data showed on Wednesday.
    Analysts polled by Reuters had predicted consumer prices
would have risen 0.1 percent on both a monthly and annual basis.
The bank itself had predicted a 0.5 percent year-on-year rise of
prices for June.   
    To fight the risk of deflation after already cutting
interest rates to near zero, the Czech central bank launched
interventions to weaken the crown currency last November.
    The crown was flat on the day at 27.445 per euro
at 0800 GMT. 
    "Even after the intervention the prices are basically not
growing and inflation is lower than the central bank expected.
The most probable outcome seems to be a later exit from the
intervention regime, which the bank has already suggested,"
analyst Jiri Simek of Citfin group said in a note.
    The central bank's board maintained its policy of keeping
the exchange rate weak at its last meeting on June 26.
Governor Miroslav Singer said then that the bank would not end
its weak crown policy before second quarter of 2015, moving the
assumed exit from "at least until the beginning of 2015" stated
earlier. 
    The bank has committed to using interventions to prevent the
crown from strengthening beyond around 27 per euro.
    The statistics office said year-on-year inflation was
depressed by food and non-alcoholic beverages prices, which
dropped by 1.1 percent after rising 2.5 percent in May. The drop
was mainly caused by potato prices, which fell by a half.
    Analysts said the annual inflation should pick up in the
coming months.
    "We expect the inflation to quicken towards the level of 1
percent during the third quarter. That should be helped by the
low base in the last year together with the influence of
reviving demand and weaker crown," economist Patrik Rozumbersky
from UniCredit said.
    "We do not expect any new step from the central bank sooner
than in June next year."

 (Editing by Jeremy Gaunt)
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