JOHANNESBURG, Dec 11 (Reuters) - South Africa's rand

strengthened on Wednesday after a domestic inflation reading was

better than expected and U.S. price data reinforced bets that

the U.S. Federal Reserve will cut interest rates next week.

At 1525 GMT, the rand traded at 17.74 against the U.S.

dollar, about 0.4% stronger than its previous close.

South Africa's inflation rate was at 2.9% year on year in

November from 2.8% in October, staying just below the central

bank's target range after food inflation slowed to its lowest

level in almost 14 years.

Economists polled by Reuters had expected inflation of 3.1%

in annual terms.

"Looking ahead, we expect inflation will continue to edge

higher over the coming months. But it is likely to remain

contained and stay below the 4.5% target mid-point," said Jason

Tuvey, deputy chief emerging markets economist at Capital

Economics.

Meanwhile, the U.S. consumer price index rose 0.3% last

month, the largest gain since April, cementing market

expectations of a 25-basis-point cut by the Fed on Dec. 18.

Economists polled by Reuters had forecast the index would

rise 0.3%.

Separately, South African retail sales rose 6.3% year on

year in October after rising by a revised 1.1% in September,

data showed.

On the Johannesburg Stock Exchange, the blue-chip Top-40

index closed about 0.3% lower.

South Africa's benchmark 2030 government bond was

stronger, with the yield down 4 basis points at 8.93%.