Last week, global central banks faced a heavy policy agenda, with both the US Federal Reserve’s FOMC and the UK’s MPC ultimately choosing to keep rates unchanged. Locally, South Africa’s fiscal accounts showed a turnaround, with the government moving from deficit into surplus.
International Market Developments
The Fed kept the rate unchanged at 3.50% to 3.75% in July 2026, its fifth consecutive pause. Economic activity, investment and employment was described as steady, though inflation remains above target due to energy costs. The decision was not unanimous, with three members favoring a 25bps hike. Chair Warsh gave little explanation, avoiding forward guidance and leaving the committee’s reasoning unclear. In last week’s US data release, inflation and labour figures were steady while growth disappointed. Headline PCE inflation eased from 4.1% to 3.7% year on year and core PCE eased from 3.6% to 3.3%. GDP growth slowed from 2.1% to 1.5% annualised, weighed down by a surge in imports, though household spending strengthened from 0.5% in Q1 to 3.2% in Q2 and private fixed investment grew 7% quarter to quarter, lifting real private final domestic purchases from 1.7% in Q1 to 3.9% in Q2.
The Bank of England left the Bank Rate unchanged at 3.75% at its July meeting, with a 6 to 3 majority in favor of holding steady while three members preferred a 25bp increase to 4.0%. The decision balanced easing inflation against risks from higher energy costs linked to Middle East tensions. Most of the MPC judged that tighter financial conditions provide time to assess whether further hikes will be needed or if the recent improvement in underlying inflation will persist.
Looking ahead, next week’s calendar is subdued, with global final PMI releases alongside the US jobless claims report.
Local Market Developments
Governor Lesetja Kganyago used the South African Reserve Bank’s 106th Annual Ordinary General Meeting to reflect on 105 years of service and to set out priorities: anchoring the new 3% inflation target, reinforcing financial stability, modernising the payments system and fostering responsible innovation. On local data last week, South Africa’s producer price inflation eased to 7.5% in June from 7.8% in May, marking a slowdown from a three‑year high. The moderation was driven by lower costs in food, beverages, tobacco, paper products, electrical machinery, transport equipment and furniture. Offsetting this, prices rose for textiles, clothing, footwear, non‑metallic minerals, and metals and machinery, while petroleum and chemical products remained elevated at 22%. On a monthly basis, producer costs slipped 0.1%, reversing the sharp 2.6% increase recorded in May.
South Africa also recorded a government budget surplus of R80.13 billion in June, the largest on record. This marks a sharp turnaround from the deep deficit of R150.85 billion in July 2025 and contrasts with the long‑term average deficit of about R21.12 billion since 2011.
Looking ahead: the data calendar will feature the ABSA Manufacturing PMI alongside the S&P Global PMI.