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Czech February inflation rate rises to 1.5% from 3-month low

The Czech inflation rate rose in February to 1.5%, fueled by higher prices of cigarettes, rents and a seasonal jump of package tours.

Inflation accelerated from a three-month-low of 1.3% in January as prices grew 0.3% in the month, the Prague-based statistics office said on its Web site today. The figures matched the median estimate by 14 economists in a Bloomberg survey. Inflation has remained below the central bank's 3% target for six months as price growth was squeezed by the koruna's firming, smaller-than-expected excise tax increases and cheaper food. The world's third-lowest lending rates may be lifted in the second half on prospects inflation may accelerate as household spending and investments advance, economists said. Inflation drivers should be „seasonal factors, the aftermath of price deregulations and cigarette price increases,” Petr Dufek, an economist at Ceskoslovenska Obchodni Banka AS in Prague, said before the release. Inflation „will in any event remain far below the central bank's target value, and this favors a wait-and-see attitude for the months to come.” The remaining impact of an April 2006 increase in the excise tax on cigarettes became visible only in February as producers and importers ran out of stocks. Tobacco products were 3.3% more expensive than in January, accounting for 0.1 percentage point of the total monthly price increase.

Holiday packages cost 4% more than in January as there's higher demand in February for travel to mountain ski resorts. Housing costs jumped 0.3% on heat and hot water. Transportation costs shed 0.8%, reflecting falling motor fuel costs. Prices of food increased 0.1% in the month and 3% from a year ago, led by rise, potatoes and coffee. The central bank, which estimated a January inflation rate of roughly 1.8-1.9%, expects household consumption to push inflation to an average 3.1% at the end of this year and 3.5% in June 2008. The bank's inflation target is 3%, plus and minus one percentage point. Policy makers said in January that the inflation outlook suggests stable rates in the coming months and their gradual increase in the long run. The bank last raised the benchmark rate to 2.5% in September. (Bloomberg)