South Africa's consumer price index (CPI) - used by the Reserve Bank for its inflation target - was up 6.4 percent year-on-year (y/y) in August from 6.7 percent in the prvious month, Statistics South Africa (Stats SA) said on Tuesday.

CPI was up 0.3 percent month-on-month (m/m) after increasing 1.1 percent in July.

Consumer inflation was expected to have receded to 6.4 percent in August, according to a survey of leading economists by I-Net Bridge. Forecasts among the economists surveyed ranged from 6.3 percent to 6.7 percent.

Economists.co.za analyst Mike Schussler said the figure was "a lot lower than I expected and certainly sets the cat among the pigeons".

He said it raised the possibility of an interest rate cut.

"However, people must be a little bit careful, as I think this will be the second-last decline for CPI and inflation could head higher into the new year."

Efficient Group economist Freddie Mitchell said it is pleasing to see that food and non-alcoholic beverages are down, and food prices are showing some signs of easing out.

He said: "We have to look at the economy as a whole and yesterday's wholesale and retail sales show that consumer expenditure is still under pressure. I don't think there is a scope for an interest rate cut today."

Investec economist Annabel Bishop said there was a 50/50 chance that rates could be cut by 50 basis points or left flat at Tuesday's MPC meeting.

However, if no cut occurs we expect there will then be one in October, as CPI inflation moves below six percent."

I-Net Bridge

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