PRAGUE, Feb 11 (Reuters) - Czech consumer prices rose by 1.3

percent in January versus a month earlier, putting annual

inflation at 1.9 percent, data showed on Monday.

The yearly figure was below the 2.1 percent median forecast

in a Reuters poll and marked a steep slowdown from December's

2.4 percent.

It was the first time inflation had fallen below the central

bank's 2.0 percent target in 15 months, and it was also below

the bank's 2.0 percent forecast.

Having cut interest rates to 0.05 percent, the bank is

considering other potential ways of easing monetary policy but

it took a less dovish stance at a meeting earlier this month.

****************************************************************

KEY POINTS:

CONSUMER INFLATION

(pct change) Jan Dec Jan fcast

month/month 1.3 0.1 1.5

year/year 1.9 2.4 2.1

Details of January inflation data...............

COMMENTS:

'Czech inflation moderated at start of the year, demand-led

inflation does not exists in the Czech economy: this is actually

no surprise at all. With the Czech crown currently trading at

stronger levels than what would be justified by the central

bank's forecast, Czech central bankers may try to navigate the

crown towards weaker levels (to circa 25.50 vs. euro) in the

weeks to come, firstly using verbal intervention.'

'The situation in the Czech economy including inflation

implies that a weaker crown would be justified, as it could help

to improve the overall situation in the economy.'

STANISLAVA PRAVDOVA, ANALYST, DANSKE BANK:

'Czech inflation in January clearly surprised on the

downside and is in fact now below the official (central bank) 2

percent inflation target.'

'The outcome only confirms disinflationary pressures in the

real economy. We still believe that there is a need for

additional monetary easing.'

'With the crown rebound after the board meeting last week,

the monetary conditions are actually somewhat tighter at this

moment. We think the CNB should step up its rhetoric again (or

it risks) seriously undershooting its inflation target.'

JAROMIR SINDEL, CHIEF ECONOMIST, CITIBANK PRAGUE

'It is another month in a row that the data undershoots the

central bank forecast.'

'The statistics office estimates that the value added tax

impact is in line with the central bank forecast.'

'Unless there are some deviations regarding food prices, we

can expect that the central bank will opt for a more dovish tone

at its next session, also with regard to the (record high)

unemployment and an expected drop in GDP.'

PETR DUFEK, DIRECTOR OF MACROECONOMIC ANALYSIS, CSOB

'Prices were pushed higher mainly by higher VAT, which hit

almost all consumer goods and services. Second in line was

January's revisions of prices tied to housing - rent, energy and

water.'

'The brake on faster price rises was - as it has been for a

number of months - weak consumer demand. Room for goods to rise

in price is very limited. Moreover, rising competition from

internet shops and their big attraction among consumers limits

room for prices to rise even more.'

'January inflation sets the benchmark for the rest of the

year... The continuing economic recession is acting like a

strong inflation brake, which limits room for prices to rise.'

DAVID MAREK, CHIEF ECONOMIST, PATRIA FINANCE

'It was slightly lower than expected. Headline inflation is

below 2 percent, the target of the central bank, so core

inflation is still in negative figures.'

'Everything is calling for easing monetary conditions. Maybe

we can see a reversal of (central bank Governor Miroslav)

Singer's words about the crown and the possibility of mentioning

forex interventions again.'

DETAILS:

- The monthly rise was mainly driven by a 1 percentage point

increase in the value added tax rates (VAT) as of January to 15

percent and 21 percent, the bureau said.

- It was also driven by the rise in housing, food and

non-alcoholic beverage prices.

- The yearly number was affected by a more marked monthly rise

in January 2013 than in 2012.

- The annual slowdown was due to a deceleration in most parts of

the consumer basket, the stats bureau said, pointing

particularly to the slowdown in the rise of rents.

BACKGROUND:

- The central bank (CNB) cut the key two-week repo rate by 20

basis points to 0.05 percent on Nov. 1, 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 1.7 percent in the first quarter of 2014 and at 1.7 percent

in the second quarter of 2014.

- The central bank next meets on interest rates on March 28.

LINKS:

- For further details on January and other past inflation data,

Reuters 3000 Xtra users can click on the Czech Statistical

Bureau's website:

http://www.czso.cz/eng/redakce.nsf/i/home

- 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)

Keywords: CZECH INFLATION/

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

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