Last week marked dovish signals from the US Federal Reserve and escalating political tensions. Global markets are pricing in a potential September US rate cut, while South Africa focuses on strengthening trade partnerships and refining its inflation framework.
Last week, the FOMC released minutes from its July meeting, which suggested that inflation risks outweigh job growth concerns. Locally, CPI for July came in as expected at 3.5% year on year up from 3.0% in June, reducing the case for the SARB to continue with its rate-cutting cycle at the next MPC meeting.
Global financial markets remain focused on the talks between Mr Trump and Russian President Putin. Locally, all eyes are on the CPI print later this week.
President Trump’s global tariffs came into effect last week, with South Africa failing to reach a last-minute deal to avert 30% tariffs. The focus now shifts to implementing strategies to mitigate the impact of these tariffs. A meeting between US President Trump and Russian President Vladimir Putin this Friday in Alaska reignites hope of a ceasefire in the Russian-Ukraine war.
Last week, markets were dominated by reserve bank activity. In the US, the Federal Open Market Committee (FOMC) voted 9-2 to maintain the federal funds rate at 4.25%–4.5%, extending the pause seen throughout the year. Locally, the SARB unanimously delivered a 25-basis point rate cut in-line with market consensus, taking the policy rate to 7.00%.
Global financial markets continue to be dominated by US trade policy, while locally, all eyes are on the SARB rate decision this week.
The US monetary policy path remains unclear amidst the ongoing tariff uncertainty as markets expect the Fed to keep its benchmark rate unchanged at the upcoming meeting later this month. Local CPI data is due out this week, with inflation expected to print at 3.1% with markets pricing in a 25-basis point repo rate cut.
Last week, President Trump unveiled new trade tariffs targeting key trade partners. Locally, President Cyril Ramaphosa responded to President Trump’s 30% tariff on South African products.
Federal Reserve Chair Jerome Powell emphasized a cautious approach to interest rate cuts due to new tariffs, which may increase inflation. US President Donald Trump announced on Monday 7 July that the US would subject imports from South Africa with a 30% tariff that would take effect from 1 August. However, there remains optimism about further negotiations with the US.
Global financial markets remain relatively and watchfully calm for now, with the ceasefire between Iran and Israel having taken effect, while locally, the dismissal of the DA Deputy Minister Andrew Whitfield has again threatened the stability of the GNU.
