Last week, the Federal Reserve lowered the federal funds rate by 25 basis points, its second consecutive cut, citing rising risks to employment and slowing job gains. Locally, South Africa’s PPI inflation rose for the fourth straight month to 2.3% year-on-year in September from 2.1% the month prior. The print was below market expectations of 2.6%.
International Market Developments
Last week, The Federal Reserve lowered the federal funds rate by 25 basis points, following a similar move in September, bringing the target range to 3.75%–4.00%, its lowest level since 2022. The decision, aimed at easing borrowing conditions amid mounting concerns over the US labour market was largely in line with expectations. The decision was not unanimous, 10 members supported the cut, one preferred to hold rates steady, and another favoured a larger 50 basis points reduction. Kansas City Fed President Jeff Schmid voted to hold rates steady, while Fed Governor Stephen Miran, an ally of President Trump, supported a 50 basis points cut. Policymakers cited increased downside risks to employment and noted that job gains have slowed, while characterising overall economic growth as “moderate.” Fed Chair Jerome Powell emphasised that further rate cuts are “not a foregone conclusion,” adding that limited data due to the ongoing government shutdown make it difficult to fully assess economic conditions. However, available public and private indicators suggest little change in employment or inflation trends since the previous meeting. The Fed also announced plans to end its balance sheet reduction programme in December.
Looking ahead, US Job Openings and Labor Turnover Survey (JOLTS) are due to be released on Tuesday. US data releases continue to face delays due to the US government shutdown, now in its fifth week.
Local Market Developments
South Africa’s Producer Price Index (PPI) for final manufactured goods rose for the fourth consecutive month to 2.3% year-on-year in September, from 2.1% in August, marking the highest reading since August 2024. The figure, however, came in below market expectations of 2.6%. The largest positive contribution to the annual rate came from food, beverages and tobacco products, which increased 3.8% year-on-year, adding 1.1 percentage points to the headline figure. Meanwhile, coke, petroleum, chemical, rubber and plastic products continued to exert a mild deflationary effect, falling 0.6% and subtracting 0.1 percentage points, though the category’s drag is easing as base effects fade. Among other categories, textiles, clothing and footwear prices remained steady at 4.1%, while metals, machinery, equipment and computing equipment edged up 1.0%. On a monthly basis, producer prices declined 0.1%, following a 0.3% drop in August, suggesting limited cost pressures at the factory gate.
Looking ahead, South Africa foreign exchange reserves for October are due to be released on Friday.