JOHANNESBURG, April 23 (Reuters) – South Africa’s central bank said on Tuesday that the path back to 4.5% inflation would probably be “bumpy and protracted” after setbacks in the disinflation trajectory in recent months.

The South African Reserve Bank (SARB) has held its main interest rate at 8.25% ZAREPO=ECI since May 2023, keeping policy restrictive to try to steer inflation towards the midpoint of its 3% to 6% target band.

In March headline inflation slowed to 5.3% in annual terms ZACPIY=ECI from 5.6% in February.

In a biannual review of its monetary policy stance, the bank said the slower pace of disinflation partly reflected normalising services components and elevated inflation expectations.

Administered prices continue to exert substantial upward pressure on headline inflation, it said in its April Monetary Policy Review.

The SARB, which is in discussions with the National Treasury about lowering its inflation target, also said in the document that it had modelled the impact of targeting 3.0% inflation over a five-year timeframe.

That modelling showed the economic growth rate decreased by about 0.3 percentage points relative to the baseline, but the decline was quickly reversed and surpassed as growth strengthened more than the initial weakening.

The central bank added markets now expect the repo rate to remain unchanged this year.

(Reporting by Kopano Gumbi; Editing by Alexander Winning)