Intellidex reviews SA MPC meeting, Moody’s ratings expectations

Intellidex reviews South African Monetary Policy Committee (MPC) meeting and Moody's ratings expectations. Peter Attard Montalto, Head of Capital Markets Research at Intellidex, joined CNBC Africa to provide insight into the potential outcomes of these key events. Montalto anticipates that the MPC will maintain interest rates at the current level, citing the neutral stance of monetary policy. Despite calls for a rate cut to align with US rates, he argues that the current policy setting is appropriate given the various risks the economy faces, such as inflation expectations and electricity tariff hikes. The recent power disruptions by Eskom have already had a significant impact on the economy, with estimates showing a loss of about 1 billion rand per stage per day of load shedding. As a result, growth forecasts for 2019 have been revised downwards to 1% from an initial projection of 1.5%, with the potential for further revisions if load shedding persists. Nonetheless, Montalto expects the MPC to exercise caution in addressing the impact of load shedding on growth, highlighting the downside risks without making drastic claims. Turning to Moody's, Montalto diverges from the consensus view by predicting that the credit rating agency will maintain South Africa's rating without any changes. He attributes Moody's cautious approach to its risk aversion and reluctance to make bold decisions regarding the Eskom bailout, long-term growth prospects, and post-election economic landscape. While other rating agencies may be more inclined to downgrade South Africa, Montalto believes Moody's will err on the side of caution and refrain from any immediate actions, potentially even delaying the release of a credit opinion. The looming decision by Moody's has stirred anticipation and anxiety across South Africa, with stakeholders eagerly awaiting Friday's outcome. The possibility of a non-release or a status quo decision from Moody's could have significant implications for the country's economic outlook, leaving many on edge. Despite the uncertainty, Montalto remains steadfast in his assessment, preparing for various scenarios and emphasizing the need for resilience in the face of potential shocks. The upcoming MPC meeting and Moody's rating review hold considerable significance for South Africa's economic trajectory, shaping investor sentiment and policy decisions. As the nation braces for the outcome of these pivotal events, stakeholders must remain vigilant and adaptable to navigate the evolving financial landscape.