The South African Reserve Bank (SARB) is due to announce its interest rate decision today and is expected to leave the repo rate unchanged at 7.0 percent, after cutting rates by 500 basis points since December.
Statistics South Africa said annual headline CPI inflation slowed from 6.7 percent in July and braked to 0.3 percent on a monthly basis from 1.1 percent, also in line with forecasts.
"At 6.4 percent, it may prove difficult for the SARB to cut today," said Leon Myburgh, sub-Saharan Africa specialist at Citi.
The central bank also looks at inflation expectations when deliberating on interest rates.
Central bank Governor Tito Mboweni said last week consumer inflation should continue moderating but the pace of decline may be limited by high power price increases and wage settlements.
Electricity tariffs went up by over 31 percent in July and wage deals across sectors have mostly been above 10 percent as workers press for higher incomes to help them cope with the country's first recession since 1992.
Mboweni also said the bank's forecasts consistently showed inflation back inside the 3 to 6 percent target range over a "reasonable time horizon".
Investec economist Annabel Bishop said even if the central bank did not cut rates on Tuesday, there was a chance of a reduction before the end of the year.
"We continue to believe there is almost an equal chance of a decision to cut interest rates by 50 basis points or leave them flat at today's MPC meeting. However, if no cut occurs we expect there will then be one in October, as CPI inflation moves below 6.0 percent," she said.
Reuters
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