Czech inflation soars to nine-year high of 7.5 per cent

Business Materials 9 February 2008 01:42 (UTC +04:00)

( dpa ) - The year-on-year inflation in the Czech Republic soared above expectations to a staggering nine-year high of 7.5 per cent in January, up from 5.4 per cent in December, the Czech Statistical Office said Friday.

Some of the government economic measures that are in place since January in order to tame the country's sprawling budget deficits were behind the surprise hike in prices.

An increase of the value-added tax from 5 to 9 per cent and direct payments in heath care were among factors that had fuelled the rise in inflation, the statisticians said.

The higher tax raised prices of food, beverages, transport or accommodations. An increase in regulated rents has also contributed to the above-expected increase.

Analysts from the Czech National Bank, commercial banks and research firms have mostly expected the January year-on-year inflation to peak at between 6 to 6.7 per cent.

"The inflation wave has steeply accelerated but we are yet to reach the peak," CTK news agency cited CSOB bank analyst Petr Dufek as saying.

The Czech National Bank hiked the interests rates by a quarter percentage point Thursday to curb further inflation expectations. The two-week repo rate, which is still among the lowest in Europe, thus reached 3.75 per cent.