Cape Town - Although the market seems to be expecting a more dovish statement, emerging market economist Peter Attard Montalto said he does not expect a meaningful shift in stance by the SA Reserve Bank's Monetary Policy Committee (MPC) on Thursday afternoon.
He sees rates unchanged at 5%.
"We think the market is vastly over-optimistic about the likelihood of the Sarb shifting into dovish rhetoric. The facts suggest little has changed."
He said it would be better to ignore the fact that the dollar/rand has come off its recent highest point since August and focus instead on the fact that it is actually some 4.2% higher than at the last meeting on September 19.
"Indeed, this is likely to be the weakest the rand has been vs the dollar at a rate meeting since February 2009, and it’s an even starker story in nominal and real terms."
On inflation he acknowledges a sharp decrease from the August peak of 6.4%, but says the more important factor is that the Sarb has long been forecasting "this near-run hump and temporary breach of target and then inflation coming back down into target".
Statistics SA on Wednesday announced that the Consumer Price Index (CPI) for all urban areas slowed down to 5.5% in October 2013.
Montalto said this is not news to the
MPC. "New data have shown surprising weakness in consumer and business
confidence, credit growth accelerating, record monthly trade balances,
downside surprises to manufacturing output and net neutral outturns across
the two months for retail.
"The macro picture is one of a weak Q3 (which again the Sarb has long forecast) with CPI risks, a weak currency and vulnerability metrics remaining high, i.e. the same story continues."