Last week marked dovish signals from the US Federal Reserve and escalating political tensions. Global markets are pricing in a potential September US rate cut, while South Africa focuses on strengthening trade partnerships and refining its inflation framework.
International Market Developments
New York Fed President John Williams described the upcoming FOMC meeting as “live”, hinting at a possible reduction in the federal funds rate, currently deemed “modestly restrictive”. He suggested that even after cuts, policy could remain somewhat tight. This aligns with Fed Governor Christopher Waller’s expectation of a 25-basis-point trim in September, followed by further easing over the next three to six months. Waller, a rumoured contender for Fed Chair next year, stressed no need for aggressive moves. Fed Chair Jerome Powell echoed this at Jackson Hole, warning of labour market risks from high borrowing costs, though decisions hinge on incoming data like inflation and jobs figures.
US economic indicators bolster the case for easing. Q2:25 GDP growth surprised at 3.3% q/q annualised, up from an initial 3.0% estimate and reversing Q1’s 0.5% contraction, driven by robust business investment and trade. Initial jobless claims dipped to 229k for the week ending 23 August, signalling labour market resilience.
In Europe, ECB President Christine Lagarde downplayed tariff impacts, stating the Eurozone can absorb them with minimal GDP effects. The ECB held rates steady in July and is likely to do so in September, reflecting subdued concerns over US-EU trade deals.
Local Market Developments
Locally, President Cyril Ramaphosa highlighted South Africa’s participation in the ninth Tokyo Conference on African Development (TICAD), emphasising Japan’s role as a key partner in construction, manufacturing, technology, agriculture, renewable energy, automotive components, and hydrogen. Amid global disruptions, Ramaphosa stressed multilateralism and strategic engagements with Global Northern and Southern partners.
Domestically, Finance Minister Enoch Godongwana and SARB Governor Lesetja Kganyago reaffirmed evidence-based macroeconomic policy in a joint statement. The SARB prefers CPI near the lower end of the 3-6% target, with the Macroeconomic Standing Committee reviewing its appropriateness. Any changes will be announced promptly to anchor expectations, supporting growth amid stable inflation.