South Africa’s inflation rate fell to an eight-month low, giving the central bank more room to cut borrowing costs to boost growth in Africa’s biggest economy.

The inflation rate fell to 5.7 percent, the lowest since September, from 6.1 percent a month earlier, Pretoria-based Statistics South Africa said on its website today. The median estimate in a Bloomberg survey of 16 economists was 5.9 percent. Prices rose 0.1 percent in the month.

“This reinforces the Reserve Bank’s thinking that we have seen the peak of inflation,” Razia Khan, head of Africa economic research at Standard Chartered Plc in London, said in a phone interview. Investors will think that “with the rand likely to appreciate further, the chances are good that we see another interest rate cut.”

Reserve Bank Governor Gill Marcus said on June 8 that policy makers will act without “fear or favor” to adjust interest rates if necessary. Inflation probably peaked in the first three months of the year and will enter the bank’s target range of 3 percent to 6 percent after the second quarter, Marcus said on May 24.

Growth in manufacturing output has slowed and mining production contracted for a 10th month in April. The economy will grow 2.7 percent this year, less than the 3.1 expansion last year, Finance Minister Pravin Gordhan said in February.

Traders have been boosting bets Marcus will cut the lending rate from 5.5 percent, the lowest level in more than 30 years. The yield on forward-rate agreements due in December have dropped 27 basis points this year to 5.23 percent.

The rand dropped 0.3 percent to 8.2284 per dollar at 10.03 a.m. in Johannesburg, extending the year’s decline to 1.7 percent. The yield on the rand bond due in 2015 dropped 5 basis points, or 0.05 percentage point, to 6.01 percent.

Bloomberg