Nomura says ZAR weakness underpins inflation fear on the SARB's monetary policy council. "Inflation would be a more pressing concern than ultimately backward-looking growth concerns from the impact of the strikes [by miners]," says strategist Peter Attard Montalto. He thinks that the central bank would err on the side of caution and prefer to keep rates unchanged than shock the market and risk eroding carry with rates already so low. Nomura currently expects a 50bps cut in November and another in 1Q13, but says it is lowering the likelihood of the second cut and increasing the chances sharply that the November cut falls to January. USD/ZAR now at 8.6634.
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