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South African Producer-Price Inflation at One-Year Low

May 31 (Bloomberg) -- South African producer-price inflation slowed to a one-year low in April, supporting the view the central bank may keep interest rates unchanged.

The cost of goods leaving factories and mines increased 6.6 percent compared with 7.2 percent in March, Pretoria-based Statistics South Africa said on its website today. The median estimate of 14 economists surveyed by Bloomberg was 6.9 percent. Prices rose 0.3 percent in the month.

“It’s a reassuring number and it could also reassure the Reserve Bank that its current rate is appropriate,” Thabi Leoka, the head of South African macroeconomic research at Johannesburg-based Standard Bank Group Ltd., said in a phone interview.

The Reserve Bank has kept its key policy rate unchanged for 18 months at 5.5 percent, the lowest level in more three decades, to help support the economy’s recovery. Slower growth in factory-gate prices may ease pressure on consumer inflation, which accelerated to 6.1 percent in April.

The central bank’s target is to keep consumer-price inflation within a range of 3 percent to 6 percent. The inflation rate probably peaked in the first quarter at an average of 6.1 percent and may drop into the target band after June, Reserve Bank Governor Gill Marcus said on May 24.

The rand weakened 0.3 percent to 8.5034 a dollar at 12:24 p.m. in Johannesburg. The currency was at 8.4999 before the data was released. The yield on the government bond due in 2021 gained 2 basis points, or 0.02 percentage point, to 7.747 percent.

To contact the reporter on this story: Franz Wild in Johannesburg at fwild@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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