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Czech Rates Probably Won’t Rise on PPI Figures, Analysts Say

Czech policy makers probably won’t accelerate interest-rate increases after producer-price growth jumped to a two-year high in October as the economy is not creating consumer inflation pressures.

Factory-gate prices, an early gauge of inflation trends, advanced 2.6 percent from a year earlier, the fastest growth since October 2008, the Prague-based statistics office said today on its website. September producer-price inflation was 2.4 percent. Prices were unchanged on the month in October.

The central bank left the benchmark two-week repurchase rate at a record low 0.75 percent on Nov. 4 and signaled borrowing costs may start increasing near the end of next year. Consumer price inflation was 2 percent in October, matching the central bank’s target.

“Central bankers will be cautious about raising rates because of the risk of a renewed recession in the euro zone and uncertain global outlook,” Jiri Skop, an analyst at Komercni Banka AS in Prague said in a report.

Inflation pressures are currently “negligible” and expectations of future price growth are “well anchored,” the central bank said on Nov. 12, adding there was no need to change interest rates at present.

“Capacity usage in the domestic economy remains low enough not to generate any price pressures, inflation is thus mainly imported or related to weather conditions,” said David Marek, chief economist at Patria Finance, a Prague-based unit of KBC Securities Group.

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