Czech cbanker sees inflation up on tax changes

Czech inflation will tick higherthis year due to changes in the value added tax agreed by the ruling coalition last week, Central Bank Governor Zdenek Tuma said on Sunday. Three parties in the centre-left government struck a deal to cut the basic value added tax rate to 19 percent from 22 percent as of May this year, when the country joins the European Union. At the same time, many items will be shifted to the base rate from the current preferential 5 percent rate to raise state revenues. Tuma said on Czech state television that the changes would boost inflation to about 3.5 percent to 4.0 percent at the end of this year from the Central Bank forecast of 3.3 percent in a quarterly inflation update last week. Analysts expect the bank to keep interest rates steady for several months before it starts raising them from the current all-time low of 2 percent.