A recent brightening in South Africa's longer-term inflation outlook means consumers can start to expect the peak in the interest rate cycle sooner rather than later, Old Mutual said on Tuesday.

"They can possibly look forward to quicker cuts in rates as well, barring unexpected shocks," said Rian le Roux, head of economic research at Old Mutual Investment Group SA in a statement.

There was good news for consumers in the latest developments around the rand, the coming revamp of inflation data and even the sharp slowdown in economic growth.

"Taken together, they have contributed to a notable lowering of our inflation forecasts for 2009," he added.

This meant that South Africans could possibly look forward to an earlier decline in interest rates in 2009 than previously expected.

Le Roux expected CPIX to peak at around 13.5 percent in the next few months, and then to fall gradually through the end of 2008, with a sharper decline in 2009.

He expected that the three to six percent inflation target would be met by the third quarter of 2009.

"The risk of further hikes has receded notably, although it has not disappeared completely," he said.

"We have also brought forward our forecasts for interest rate easing, now beginning from mid-2009 rather than late 2009."

Le Roux, however, said the down-cycle in interest rates should be fairly gradual rather than sharp due to a number of obstacles like increases in electricity prices, high inflation expectations and high wage rises.

He said the surprisingly sharp economic slowdown seen recently had shown that the past tightening in monetary policy was "working very well to curb the consumer", and the latest 50-basis-points hike had yet to make itself felt.

Sapa