Last week, global markets remained sensitive to evolving U.S.-China tariff developments, with both nations exploring selective exemptions amid ongoing trade tensions. Locally, the decision to cancel the proposed VAT increase, combined with inflation dropping to a multi-year low, has raised expectations for potential interest rate relief as the Monetary Policy Committee (MPC) convenes this week.
Last week, President Donald Trump intensified his criticism of Jerome Powell, adding to investor jitters over the Fed’s independence and the chair’s position. Locally, SA Reserve Bank governor Lesetja Kganyago has warned against a knee-jerk reaction to newly imposed (and now paused) US tariffs, urging businesses to focus on improving competitiveness rather than resorting to protectionist measures.
Global financial markets continue to be affected by global trade shifts and by the escalating trade war between the US and China. Locally the rand has dropped sharply on the back of instability within the GNU.
Last week, markets declined in response to President Donald Trump’s announcement of higher-than-expected tariffs on all exports to the United States. This was swiftly followed by China’s announcement of retaliatory tariffs on U.S. imports, indicating a significant escalation in the ongoing trade dispute and raising concerns over the potential for a global recession. On the domestic front, the National Assembly narrowly approved the fiscal framework; however, uncertainty persists as legal proceedings have been initiated, citing procedural deficiencies in the approval process.
March saw improvements in US PMI data which helped boost overall business sentiment, while the US economy continues to show steady momentum. Locally, the GNU comes under threat over the budget, putting pressure on the local bond market.
Central banks acted cautiously last week, opting to keep policy rates on hold during a high degree of market uncertainty. Domestically, inflation remained unchanged and below the SARB’s midpoint target.
Last week, Finance Minister Enoch Godongwana’s finally delivered the 2025 Budget presentation, reaffirming a commitment to fiscal consolidation and implementing a phased VAT hike of 1%. This week, global markets are closely watching central bank monetary policy decisions, with the Federal Reserve (Fed), the Bank of England (BOE) and the South African MPC all due announce policy rate decisions. The MPC decision will likely be a close one, with a 25 bps rate cut not out of the question.
The South African Minister of Finance, Enoch Godongwana, delivered the 2025 Budget Speech on March 12th, mapping out his strategy for economic recovery while maintaining fiscal discipline. It is clear from the Minister’s speech that difficult policy choices were made, including a phased VAT increase and a renewed commitment to structural reforms.
Last week, US markets were spooked after tariffs against Canada and Mexico came into effect, with the S&P500 seeing its worst sell-off of the year in response to the news. Locally, although the Q4 GDP numbers showed a rebound from the contraction reported in Q3, the reported growth was still lackluster.
Global markets are currently navigating a complex mix of geopolitical risks, trade tensions, and domestic economic pressures while, locally, CPI in January came in at 3.2% as expected.
