CNB Board unanimously decided to leave rates unchanged at October sitting.

CNB Board unanimously decided to leave rates unchanged at October sitting. The Czech National Bank (CNB) Governing Board unanimously decided to keep interest rates flat at 2.5% at its last monetary session at end-October, reports the national bank in Minutes of the Board. The inflation in October (1.3% y/y) was 0.3pps below the projections with the deviation being due to the lower-than-expected food prices increase and lower adjusted inflation excluding fuels; on the other hand, regulated prices, fuel prices and the estimated impacts of indirect taxes changes were broadly in line with forecasts. Still, the adopted law on raising the indirect tax on tobacco is expected to have some 0.3-0.4pps higher contribution to inflation in 2007 than earlier projected. In addition, the agricultural and industrial producer prices growth also appeared lower than the projected one, the minutes read. At the same time, central bankers did not consider there is risk to economic activity forecast, under which GDP growth is to further slow down to 5.4% y/y in Q4. Thus, the Board agreed that the risks to the forecast were on the downward, but, as long as they could result from combination of several transitory anti-inflationary factors, the central bank is not to react impulsively. In the meantime, regarding the exchange rate developments, it was concluded that the observed at present CZK appreciation might also represent another downside risk to inflation.