By Stella Mapenzauswa JOHANNESBURG (Reuters) - South Africa's targeted consumer price inflation braked sharply to 6.9 percent in June and credit growth slowed to a 5-year low, data showed on Wednesday, revitalising calls for more interest rate cuts. The deceleration in inflation, partly due to base effects from higher food and fuel prices last year, might not be enough to persuade the central bank to cut interest rates at its next meeting in August, with CPI still above a 3-6 percent target band. Analysts, however, say bigger than expected easing in inflation, credit and money supply growth for June may open the way for a cut later this year, particularly if prices surprise on the downside again. "This is a pleasant surprise. It might not suggest an interest rate cut but it gives the monetary policy committee room to consider it," Mandla Maleka, chief economist at power utility Eskom, said. Africa's biggest economy is in its first recession in nearly two decades and some economists say rates are still too high. Government bond yields ticked lower after the inflation data was released, as traders moved to price in more chance of another rate cut. Statistics South Africa said headline CPI inflation braked from 8.0 percent in May to its lowest level in two years, and was at 0.4 percent on a monthly basis in June, the same rate of increase registered previously. A Reuters poll of 17 economists forecast CPI would slow to 7.1 percent year-on-year and come in at 0.6 percent on a monthly basis. CREDIT DEMAND DOWN Consumer price inflation has trended lower since peaking at nearly 14 percent in August last year, but the pace of deceleration this year had been disappointing - until the June data. The central bank left rates steady last month on inflation worries, halting a loosening cycle to spur flagging growth that began in December and sent the repo 450 basis points lower to 7.5 percent. But this has not fully unwound the 5 percentage points in hikes between June 2006 and June 2008. Some analysts believe the rate cuts are done. "We continue to believe that the Reserve Bank will probably remain relatively hawkish on the inflation front ... and we would see them keeping rates on hold at the August (meeting)," said Absa Capital macro strategist Jeffrey Schultz. "We also think we have reached the end of the (loosening) cycle." But others said a marked easing in price pressures may prompt the central bank to move again, especially after central bank data showed credit demand growth eased to a five-year low of 3.98 percent last month. During the same period, the broadly defined M3 money supply growth slowed to a near nine-year low of 6.04 percent. "After this morning's money supply and credit extension data, the weakness of which really drove home the ongoing downside risks to growth, we imagine there will a lively debate on at the SARB regarding what to do with monetary policy," said Razia Khan, Standard Chartered's head of Africa research. | 
