Czech inflation accelerated more than expected in January to 7.5 percent, the highest in more than nine years, because of government increases in taxes, rent and health- care fees, Bloomberg reports.

The inflation rate, the highest since October 1998, rose from 5.4 percent in December, the Prague-based statistics office said on its Web site today. It exceeded the median estimate of 6.5 percent in a Bloomberg survey. Prices climbed 3 percent in the month, the highest in a decade, from 0.5 percent the month before.

The central bank yesterday lifted the main interest rate to 3.75 percent to support efforts to return inflation below the 3 percent target next year. Today's figure, which beat the central bank's 6.7 percent projection, may prevent chances of starting to slash rates later this year, economists said.

The koruna jumped to 25.580 per euro as of 9:25 a.m. in Prague from 25.715 before the data was released and from 25.756 in yesterday's late trading.

The ask yield on the government 10-year bond climbed 8 basis points to 4.53 percent. The price fell 0.7, or 70 koruna per 10,000 koruna ($565) face amount, to 100.55, according to Ceska Sporitelna prices. A basis point is 0.01 of a percentage point.

Inflation, the fifth fastest pace in the European Union, was fueled by the Jan. 1 increase in the lower valued-added tax rate to 9 percent from 5 percent on goods such as food, drugs and books. The tax increase boosted monthly price growth by 1.1 percentage points.

The price of electricity advanced 9.5 percent while natural gas was 7.8 percent more expensive. State-controlled rents jumped 18.9 percent from December, the authority said.

Administrative price increases accounted for 2.9 percentage points of the monthly growth. New health-care regulatory fees made up 0.5 percentage point to the overall monthly price index while food prices were 2.3 percent higher in the month, led by fruit, vegetables, meat and dairy products.

The Jan. 1 increase in the excise tax on tobacco will be seen in cigarette prices only later this year as producers have stockpiles of older products under the previous tax for at least five months, Mlada Fronta Dnes said on Feb. 5, citing data from the Czech Business Bulletin, where the companies report prices.

The inflation rate has exceeded the upper end of the central bank's target range of 3 percent plus or minus a percentage point since October.

The central bank said in its quarterly forecast published yesterday that it expects inflation to reach 5.3 percent in the fourth quarter of 2008, before it falls to 2.4 percent in the second quarter of 2009 on anticipation that inflation will return to the target next year once temporary costs and administrative shocks start dropping out of the price index later in the year.

Inflation should also start to recede in the coming months as a result of the koruna's 13 percent gain against the euro and its 20 percent appreciation against the dollar over the past seven months. An expected economic slowdown this year, caused by weaker household demand, should aid disinflation. The central bank predicts gross domestic product to expand 4.1 percent this year, compared with 6.1 percent in 2007.