Last week, the US Federal Reserve (Fed) released the September meeting minutes when the Fed cut rates by 25 basis points. The minutes noted moderating economic activity, elevated inflation, and rising unemployment, with uncertainty about the outlook as the main factor influencing the decision. Locally, SARB Governor Lesetja Kganyago clarified that there is no disagreement between the central bank and National Treasury on lowering the inflation target.
International Market Developments
Last week, the minutes of the US Federal Open Market Committee’s (FOMC) September meeting were released. The minutes revealed that policymakers remain open to further rate cuts this year, though concerns over persistent inflation continue to temper enthusiasm for aggressive easing. The Committee voted 11–1 to reduce the federal funds rate by 25 basis points to 4.00–4.25%, with one member favouring a larger 50 basis points cut. Updated projections indicate two additional 25 basis points cuts before year-end. While labour market risks have risen, members judged a sharp deterioration in employment as unlikely. The discussion reflected growing concern over “substantial downside risks” stemming from domestic policy uncertainty around trade, immigration, fiscal spending and regulation. Economic data remained mixed—Q2 GDP growth rebounded to 3.8%, inflation held near 2.7–2.9%, and unemployment rose slightly to 4.3%. Staff forecasts suggest subdued growth through 2025 and inflation trending toward target, as tariff effects and reduced immigration modestly influence the outlook.
The US government entered its first shutdown in nearly seven years, now extending into its third week. Several key economic data releases, including CPI, PPI and retail sales have been delayed. The Senate rejected a Republican-backed stopgap funding bill that failed to meet Democratic demands for increased healthcare spending. Following instructions from the White House’s Office of Management and Budget, federal agencies have begun executing their shutdown plans. While essential services such as the military remain operational, many federal workers have been furloughed, and others are working without pay. President Trump has warned of “irreversible” federal job cuts and suggested that his administration may dismiss “a lot” of federal employees. The suspension of government services and data releases has left policymakers and markets operating with limited visibility into current economic conditions.
Looking ahead, US CPI, PPI and retail sales data is due to be released this week. Due to the ongoing US government shutdown, we expect delays to data releases.
Local Market Developments
According to Stats SA, manufacturing output fell by 1.5% year-on-year in August, extending a revised 1.3% decline the month prior. The largest negative contributions came from the basic iron and steel, non-ferrous metal products, and metal products and machinery division, which fell 5.9%, subtracting 1.3 percentage points, and the food and beverages division, which declined 3.0%, shaving 0.7 points off the index. On a seasonally adjusted monthly basis, industrial output rose by 0.4% in August, after a revised 0.8% decrease in the previous month. Seasonally adjusted manufacturing production increased by 1.5% in the three months ended August 2025 compared with the previous three months.
South African Reserve Bank (SARB) Governor Lesetja Kganyago clarified that there is no disagreement between the central bank and National Treasury regarding the SARB’s intention to anchor inflation at the lower end of its target range. He acknowledged that the Bank’s communication on the matter had caused some confusion, particularly following his July announcement, which was perceived by some as a unilateral move. Kganyago emphasised that he has since met with Finance Minister Enoch Godongwana, and both have instructed their respective teams to finalise the technical details of lowering the inflation target. He noted that the current environment of well-contained inflation presents an ideal opportunity to “lock in” low inflation and solidify expectations. According to Kganyago, maintaining low and stable inflation supports a predictable interest rate environment, which is essential for encouraging investment, job creation and sustainable economic growth.
Looking ahead, South Africa retail sales numbers for August are due to be released on Wednesday. Markets expect year on year retail sales to have accelerated by 3.5% from 5.6% the month prior.