South African inflation drops sharply, paving way for more rate cuts
Adds economist comments in paragraphs 5 and 8, more context throughout
JOHANNESBURG, Oct 23 (Reuters) -South Africa's inflation dropped sharply in September, hitting its lowest level in more than three years and bolstering expectations for another interest rate cut by the central bank next month.
Annual consumer price inflation slowed to3.8% from 4.4% in August ZACPIY=ECI, Statistics South Africa data showed.
Economists polled by Reuters had forecast inflation would drop to3.9%, well below 4.5% - the mid-point of the South African Reserve Bank's 3%-6% target range.
The Consumer Price Index (CPI) rose0.1% month-on-month in September, the same as a month before ZACPI=ECI.
"Inflation is well under control in South Africa, this is really the start of a period of about 6 months in which the headline CPI should be below 4%," said independent economist Elize Kruger.
The central bank struck a measured tone at its September meeting when it trimmed its main interest rate by 25 basis points to 8%, saying there were still risks on the horizon.
Analysts expect the bank to continue easing policy in quarter point increments, taking the repo rate ZAREPO=ECI to 7% by the middle of next year.
"Larger 50 bps moves are unlikely, in our view," Standard Chartered's Razia Khan said in a research note. "We think the SARB will want to proceed cautiously, monitoring global risks and any consumption boost from South Africa's recent Two Pot Pension Reforms, which allow earlier pension withdrawals," she said.
Reporting by Bhargav Acharya, Kopano Gumbi and Tannur Anders
Editing by Alexander Winning and Tomasz Janowski
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