By Sfundo Parakozov
JOHANNESBURG, Jan 21 (Reuters) - South African inflation rose slightly in December, as expected, but analysts said they still expect the central bank to deliver several interest rate cuts this year as price pressures remain well contained.
Headline consumer inflation increased to 3.6% year on year in December from 3.5% in November, as predicted by analysts polled by Reuters.
The modest rise keeps the headline rate within the 1 percentage point tolerance band of the central bank's
3% target, and the statistics agency said average inflation for 2025 of 3.2% was the lowest in 21 years.
Annual core inflation, which strips out volatile items like food and energy, came in at 3.3% in December, in line with economists' forecasts.
At its last monetary policy meeting in November, the South African Reserve Bank (SARB) cut its main lending rate by 25 basis points to 6.75%, and its next policy announcement is scheduled for January 29.
"With real rates still quite high, and the inflation outlook both benign and continuing to improve, there should be scope for the SARB to ease policy further," Elna Moolman, Standard Bank's head of South Africa macroeconomic research, told Reuters.
Moolman said she expected a rate cut at one of the next two policy announcements, "with the odds likely slightly biased towards January rather than March".
Independent economist Elize Kruger said a stronger rand exchange rate than in November and declining inflation expectations meant there was room for another 25-basis-point rate cut next week.
A breakdown by Statistics South Africa showed the main drivers of December's marginally higher headline inflation were the housing and utilities, food and non-alcoholic beverages and insurance and financial services categories.
(Additional reporting by Anathi Madubela;Editing by Alexander Winning and Sharon Singleton)
