Last week, weaker U.S. payroll growth reduced expectations of an October Fed policy shift. Locally, August fiscal data showed robust tax revenue growth and resilience despite the Middle East shock.
International market developments
Global markets remained unsettled as geopolitical and economic risks intensified. A sharp bond sell-off drove borrowing costs in the U.S., Japan and the UK to decade highs, affecting British mortgages and tightening financial conditions. Energy pressures rose as Washington urged Europe to release diesel reserves, while Iran’s growing influence in Iraq heightened supply concerns. Russian attacks on Ukraine, Moscow’s warning to NATO over Kaliningrad and U.S. midterm uncertainty added to volatility in rates, commodities and risk assets.
U.S. employment weakened in September as non-farm payrolls rose by only 29,000, down from a revised 133,000 in August and below expectations of about 90,000. Earlier gains were revised down by 60,000. Unemployment increased to 4.2% from 4.1%, while private payrolls rose by 46,000. Healthcare added 17,000 jobs, construction 11,000 and manufacturing 9,000, while financial activities lost 7,000. Monthly wage growth slowed to 0.1% from 0.3%, lowering the annual rate to 3.0%.
Eurozone headline inflation rose to 3.8% in September from 3.2%, exceeding expectations and reaching its highest level since 2023. Energy inflation accelerated to 18.8%, services to 3.2% and unprocessed food to 4.0%, while core inflation edged up to 2.5%. Price growth therefore remained well above the ECB’s 2% target.
Looking ahead, the FOMC’s September meeting minutes are due on Wednesday.
Local market developments
Locally, Governor Kganyago warned that interconnected risks from climate change, geopolitics, AI, debt and fiscal dominance could create a “crisis cascade” in which shocks intensify over time. Deputy Governor Tshazibana also highlighted climate and nature risks. The SARB strengthened its leadership by appointing Franz Ruch, returning from the World Bank, as adviser to the governors and the MPC’s seventh member.
South Africa’s August data showed resilience ahead of the MTBPS. The main budget deficit narrowed to R29.1bn from R38.3bn a year earlier, while cumulative revenue grew 9.5% year to year and tax receipts 7.9% year to year, both ahead of full-year targets. Spending remained contained, and producer inflation eased to 5.0% y/y from 5.7%, with little evidence of broad fuel-price pass-through.
Looking ahead, domestic monetary policy will take centre stage on Tuesday when the SARB hosts its biannual Monetary Policy Forum.