By Stella Mapenzauswa JOHANNESBURG (Reuters) - South Africa's producer price index fell by a record 4.1 percent year-on-year in June, according to data on Thursday, backing the case for more interest rate cuts this year. The South African Reserve Bank (SARB) left interest rates steady last month on inflation worries, halting a monetary easing cycle to revive economic growth that began in December, and has led to 450 basis points worth of cuts. Statistics South Africa said the June annual fall in factory gate prices followed a 3.0 percent decline in May, but month-on-month PPI inflation was at 1.5 percent in June compared with -1.1 percent in May. Imported commodities inflation stood at -17.9 percent year-on-year in June, while exported commodities inflation was at -9.7 percent. Economists polled by Reuters last week forecast that annual PPI would come in at -3.8 percent and quicken to 1.8 percent on a monthly basis. The PPI number comes a day after targeted CPI consumer inflation braked to 6.9 percent year-on-year in June from 8.0 percent in June, moving closer to within the 3-6 percent target band breached in April 2007. Analysts said the data, with the slower-than-expected consumer inflation and easing growth in credit demand, increased prospects of more interest rates cuts this year. "This must provide some comfort to the MPC (monetary policy committee)," said Barnard Jacobs Mellet economist Elna Moolman. "At this stage we don't expect another interest rate cut but there is a material risk that inflation could ultimately provide scope for further monetary easing." A revised and re-weighted headline CPI replaced CPIX -- which stripped out mortgage costs -- as the inflation gauge targeted for monetary policy from January. But expectations that this would see inflation coming down quickly had not materialised until the June easing. LOOSENING CYCLE ENDED? The central bank lifted rates by 500 basis points between June 2006 and June 2008 to try and rein in inflation, which peaked at nearly 14 percent in August last year. The central bank next meets to decide on interest rates on August 12-13. Some analysts still believe the current monetary loosening cycle ended with the 100 basis point cut in May that left the key repo rate at 7.5 percent. "Overall, for policy, I don't think there's any more room for the SARB to cut rates even as inflation continues to slow," said Monale Ratsoma, an economist at Thebe Securities. "The priority is more or less about where the long term sustainable rate is at ... and we're more or less at that level." The rand was trading firmer at 7.8125 against the dollar at 1026 GMT from 7.8440 before the data was released at 0930 GMT. The yield on the 2015 bond was at 8.44 percent from 8.445 percent. | 
