By Kopano Gumbi and Alexander Winning
JOHANNESBURG (Reuters) -Consumer inflation in South Africa dipped slightly in August on lower fuel prices but analysts said the decline was likely not large enough to deter the central bank from further rate hikes.
Statistics South Africa said on Wednesday inflation eased to 7.6% year on year in August from 7.8% the previous month.
Fuel prices fell by 3.8% between July and August, contributing to the overall softening of inflation. However food inflation remained high, rising 1.7% from July and preventing a steeper drop in the headline figure.
Economists polled by Reuters had predicted that annual inflation would fall to 7.5% in August.
The South African Reserve Bank (SARB) is scheduled to announce its latest monetary policy decision on Thursday, and analysts expect another 75 basis points increase in the repo rate.
Lesetja Kganyago, the Reserve Bank governor, has stressed that its monetary policy committee bases interest rate decisions on more than one month’s inflation data, focusing on the longer-term impact of price pressures and inflation expectations.
While the latest inflation data suggest the SARB’s efforts to curb inflation may be starting to bear fruit, economists said further policy tightening is still on the cards in line with expected moves by global central banks to rein in inflation.
“We doubt this will be enough to convince the Reserve Bank to scale back its aggressive tightening cycle,” Capital Economics analysts in a research note.
They added that although they expected a further drop in fuel prices in the coming months, headline inflation would probably remain above the SARB’s 3%-6% target range into next year because of elevated food prices.
Stats SA figures also showed on Wednesday a decline in monthly consumer inflation, to 0.2% in August from 1.5% in July.
Core inflation, which excludes prices of food, non-alcoholic beverages, fuel and energy, fell to 4.4% year on year in August from 4.6% in July, and 0.2% month on month from 0.7% previously.
(Reporting by Kopano Gumbi and Alexander WinningEditing by James Macharia Chege and Mark Heinrich)