Last week, markets perked up as the odds of a US Fed rate cut on 10 December jumped to 90% – from just 30% a few weeks back – thanks to soft American data and chatter that Kevin Hassett is in pole position for Fed Chair. Locally, the SARB’s MPC delivered a unanimous 25bps repo cut to 6.75% on 19 November – its third in a row, totalling 150bps of easing since September 2024.
International Market Developments
Fed speakers were divided ahead of next week’s meeting. San Francisco’s Mary Daly is pushing for a cut, warning the jobs market is “vulnerable” and could nosedive if things worsen – with little risk of inflation flaring up again. New York’s John Williams says there’s “room for adjustment”, and Chris Waller wants easing now because of labour market softness. Boston’s Susan Collins, though, is playing it cool: policy is “mildly restrictive” but just right, with financial conditions giving the economy a boost rather than a drag.
Markets have bought the dovish vibe hook, line and sinker – with odds of a December cut now at 90%. The data’s been a mixed bag, but mostly soft:
- Consumer Confidence: The Conference Board index tanked to 88.7 from 95.5. Current conditions hit a more-than-year low, and six-month expectations are at an April trough.
- Retail Sales: Up a meagre 0.2% month-on-month (from 0.6% before); ex-autos and gas, just 0.1%.
- PPI: 2.7% y/y as expected, but core eased to 2.6% from 2.9%.
- Housing: S&P Case-Shiller slowed to 1.3% y/y for the eighth month running; FHFA flatlined.
November’s jobs report is delayed till 16 December due to the shutdown backlog. This week, eyes will be on Friday’s PCE inflation – the Fed’s favourite gauge – plus ADP jobs, ISM PMIs, as well as trade and industrial production data.
Local Market Developments
The Monetary Policy Committee on 19 November unanimously trimmed the repo rate by 25 basis points to 6.75% – bang in line with most market calls, though five analysts had tipped no change. This marks the third cut since September 2024, chalking up 150bps of easing and landing the rate at its lowest since November 2022.
The move came despite inflation ticking up mildly, with forecasts pointing to a 4.0% peak by December 2025. But the SARB backed the cut on softer-than-expected prints over the last three months, slashing its Q3 2025 inflation forecast to 3.5% (from 3.6%) and Q4 to 3.9%. The Bank flagged two big risks under the new 3% inflation target (±1ppt band): a US dollar rebound and front-loaded Eskom tariff hikes from a R54bn NERSA clawback.
Foreign investors have injected R119bn into South African government bonds in 2025—doubling last year—lured by elevated yields, falling rates, subdued inflation, and fiscal progress. This has pushed the JSE All Bond Index to record highs since 2000. Conversely, foreigners have sold R165bn in JSE equities despite a 40% dollar rally this year, citing stagnant growth, weak earnings, and GNU policy risks. Bonds and stocks performance has decoupled, with sustainable growth essential for equity rerating.