South African rand softens as Sept rate cut looms after inflation drop
Updates prices to reflect afternoon trade, adds analyst comment in paragraph 5
JOHANNESBURG, Aug 21 (Reuters) -The South African rand softened onWednesday as localinflation fell to a three-year low in July, solidifying analysts' expectations of an interest rate cut by the South African Reserve Bank next month.
At 1511 GMT, the rand traded at 17.8450 againstthe dollar ZAR=D3, 0.25% softer than Tuesday's close.
Consumer inflation fell more than expected to 4.6% in July from 4.8% a year ago and 5.1% in June ZACPIY=ECI, statistics agency data showed. Analysts polled by Reuters had forecast annual inflation of 4.9%.
The latest figure was within touching distance of the central bank's preferred level of inflation of around 4.5%, the midpoint of its 3% to 6% targetrange. Economists polled by Reuters expect a rate cut of 25 basis points (bps)on Sept. 19.
"The favourable inflation print should give the (central bank) greater confidence to commence its easing cycle with a 25-bps cut in September, and back it up with another 25-bps cut in November," said Jee-A van der Linde, senior economist at Oxford Economics.
Globalmarkets are awaitingminutes of the Federal Reserve's latestmeeting, due later on Wednesday, for clarity on the rate-cut path of the U.S. economy.
In the stock market, the Top-40 .JTOPI index closed 0.33% higher.
South Africa's benchmark 2030 government bond ZAR2030= rose, reducingthe yield 16.5 basis points to 9.120%.
Reporting by Tannur Anders and Bhargav Acharya; Editing by Rashmi Aich and Richard Chang
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