JOHANNESBURG, May 20 (Reuters) - South Africa's rand,

stocks and government bonds firmed on Wednesday after data

showed April inflation accelerated sharply, raising expectations

that the central bank could hike interest rates at its monetary

policy meeting next week.

* At 1300 GMT, the rand traded at 16.5950 against the dollar

, up about 0.7% from its previous close.

* Headline inflation rose to 4.0% year on year in April

, up from 3.1% in March and the highest since August

2024, driven mainly by sharp fuel price rises linked to the

U.S.-Israeli war against Iran.

* Nedbank economists expect inflation to increase further in

the coming months, citing higher fuel costs.

* As a net fuel importer, South Africa is heavily exposed to

a spike in global energy prices.

* Nedbank economists added that the central bank would

likely adopt a proactive stance to counter emerging inflationary

pressures with a 25-basis-point rate hike.

* "We maintain our forecast for three 25-basis-point rate

hikes in May, July and September to anchor inflation

expectations," Citi Research said in a note.

* Separate data from Statistics South Africa showed that

retail sales rose 2.6% year-on-year in March after rising 1.6%

in February.

* On the Johannesburg Stock Exchange, the Top-40 index

was up about 0.6%.

* South Africa's benchmark 2035 government bond

strengthened, with the yield falling 6 basis points to 8.87%.