Globally, US CPI for January registered lower than expected, while locally, SARS has achieved its highest ever revenue collection and January local CPI is expected to moderate this week.
International Market Developments
The release of US CPI data provided a spark of optimism last week as the figures came in lower than consensus. The US CPI for January came in at 2.4% y/y, from 2.7% y/y in December. On a m/m basis, CPI increased by 0.2%, below expectations, after having increased by 0.3% in December. Core CPI moderated, to 2.5% y/y in January, as expected, from 2.6% y/y in December, and at 0.2% m/m. Data offers fresh evidence that price pressures in the US economy continue to cool. The softer than expected inflation reading bolsters hopes that the Fed may gain confidence to consider future interest rate cuts. The Fed is due to meet on 18 March to decide on rates.
President Trump said that his preferred candidate to lead the Fed, Kevin Warsh, could lift economic growth to 15% if confirmed. Trump added that Warsh had been the runner-up in his previous search for a Fed chair, calling it a major mistake to have chosen Jerome Powell instead. The remarks suggest Trump is betting that Warsh could help boost the economy ahead of the midterm elections. Warsh’s confirmation, however, could be delayed, with potential obstacles including a Justice Department probe and scrutiny surrounding a Fed building renovation project.
Local Market Developments
Last week, President Cyril Ramaphosa, in his weekly newsletter, commended and congratulated the staff of the SARS National Command Centre for their outstanding work. He highlighted that SARS has achieved its highest ever revenue collection, bringing in R2.3 trillion, a milestone he described as significant for the country. The President emphasised that the revenue collected forms the lifeblood of the nation. Revenue collection enables government to deliver essential public services, pay social grants to vulnerable citizens, build and maintain public infrastructure, and keep the machinery of the state functioning effectively. Ramaphosa also noted that SARS played a crucial role in SA’s removal from the Financial Action Task Force (FATF) grey list, as well as in the sovereign credit rating upgrade from S&P last year.
The January CPI is due for release on Wednesday and is expected to have moderated to 3.4% y/y, from 3.6% y/y in December.