Last week, the US central bank voted unanimously on Wednesday to keep the benchmark federal funds rate in a range of 4.25% to 4.5%, where it’s been since December. Locally, the launch of the second phase of Operation Vulindlela (OV 2.0) took center stage in a relatively quiet domestic data week.
International Market Developments
Last week the federal reserve opted to keep the benchmark federal funds rate in a range of 4.25% to 4.5%, where it has been since December. It was a unanimous vote among fed officials. Federal Reserve Chair Jerome Powell said he’s not in a hurry to adjust interest rates in a world where tariffs could lead to higher inflation and unemployment. President Donald Trump‘s trade policy has introduced a high level of uncertainty across global markets. Economists widely expect the expansive tariffs to boost inflation and weigh on growth. That would pit policymakers’ two goals—price stability and maximum employment—against one another. With unemployment still low and demand steady, Fed officials have said they are comfortable keeping rates unchanged until they have a better understanding of where the economy is headed. Powell repeated that sentiment Wednesday, adding that the cost of waiting is fairly low.
US President Trump last week announced a trade framework with the UK, hailing it as a “breakthrough” and a “tremendous trade deal for both countries”. The agreement, though still under negotiation, is expected to fast-track US goods through UK customs and reduce trade barriers on key exports such as agricultural products, chemicals, energy, and industrial goods. Automotive tariffs will reportedly drop to 10%, while duties on metals will be eliminated. US officials are optimistic that the deal could open the door to further trade agreements. UK Prime Minister Keir Starmer acknowledged the progress but noted that several key details remain unresolved.
Looking ahead, investors will keep a keen eye on April’s US consumer and producer inflation data due on Tuesday and whether these reflect any tariff impact yet.
Local Market Developments
Last week, Phase II of Operation Vulindlela launched on 7 May, building on the successes of Phase I by continuing reforms in key sectors and introducing new initiatives focused on spatial integration of cities, digitalization of state services, and strengthening local government. While digitalization could progress quickly, it requires costly IT infrastructure, with questions around funding and reliance on the underperforming State Information Technology Agency (SITA). Efforts to integrate cities and restore passenger rail also face financial hurdles. The most challenging area is improving municipal performance, especially in large metros, due to entrenched governance and financial issues. However, one part of the local government reforms which could kick off fairly quickly is the initiative to move to a ‘utility model’ for revenue generating services provided by South Africa’s eight metros. A detailed reform plan is expected in the coming weeks.