Wednesday November 25, 10:30 AM
UPDATE 1-S.Africa CPI returns to target band, risks remain
JOHANNESBURG, Nov 25 (Reuters) - South Africa's targeted consumer inflation slowed in line with expectations in October, returning to the 3 to 6 percent target band for the first time in more than 2-1/2 years, official data showed on Wednesday.
Statistics South Africa said annual headline CPI (NYSE: CPY - news) slowed to 5.9 percent in October from 6.1 percent in September and was unchanged on a monthly basis compared with 0.4 percent the previous month.
A Reuters poll last week forecast CPI would slow to 5.9 percent year-on-year and come in at 0.1 percent on a monthly basis.
Headline inflation has stayed above the central bank's target band since piercing it in March 2007, peaking at close to 14 percent in August last year before gradually coming down.
As inflation has slowed the central bank has reduced interest rate by 5 percentage points between December 2008 and August this year, totally unwinding increases in the two years to June 2008.
Analysts, however, said the dip back into the target band could be temporary.
'Obviously it creates some optimism in terms of consumer spending. But we should be a bit weary that the annualised rate could climb towards year-end again due to the base effects,' said Christie Viljoen of NKC Independent Economists.
The central bank has said it expects inflation to fall within the target band on a sustainable basis by the second quarter of 2010 and sees high electricity price rises as the main long-term risk to the outlook.
State-owned electricity firm Eskom will submit a revised request for tariffs after strong criticism of its initial plan to raise prices by 45 percent a year over the next three years.
The rand was virtually unchanged at 7.3950 against the dollar at 1000 GMT from before the data was released at 0930 GMT, while the yield on the 2015 government bond was also little changed at 8.38 percent.
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