President Trump’s global tariffs came into effect last week, with South Africa failing to reach a last-minute deal to avert 30% tariffs. The focus now shifts to implementing strategies to mitigate the impact of these tariffs. A meeting between US President Trump and Russian President Vladimir Putin this Friday in Alaska reignites hope of a ceasefire in the Russian-Ukraine war.
International Market Developments
Fed officials continue voice caution on rate cut expectations. Minneapolis Fed President Neel Kashkari indicated that a rate cut may be appropriate soon, citing a slowing economy and forecasting at least two cuts by year-end. He highlighted tariffs as a source of uncertainty, potentially influencing inflation and leading to fewer cuts if effects prove persistent. Fed Governor Lisa Cook described July’s non-farm payrolls as “concerning,” signalling a possible economic inflection point amid cooling labour market data. Boston Fed President Susan Collins noted uncertainty prompting a wait-and-see approach to pricing. Attention turns to the US July Consumer Price Index (CPI) release today, expected to rise to 2.8% year-on-year from 2.7% in June. On a month-on-month basis, headline CPI is forecast to increase by 0.2%, down from 0.3% in June, while core CPI is anticipated at 3.0% year-on-year (0.3% month-on-month), up slightly from 2.9% (0.2%) previously. The Fed will scrutinise the data for signs of tariff-related price pressures.
The upcoming meeting between US President Donald Trump and Russian President Vladimir Putin this Friday in Alaska has sparked optimism for a potential ceasefire in the Russia-Ukraine war. While peace in Ukraine remains a stated priority for all parties, the terms of any agreement will carry significant long-term implications for global stability.
Local Market Developments
President Trump’s global tariffs have taken effect, imposing reciprocal levies even on economies with recent US trade deals, such as the EU and Japan. Steep tariffs target India for Russian oil purchases, while South Africa faces 30% duties – the highest of any sub-Saharan nation. President Cyril Ramaphosa addressed US tariffs in his weekly newsletter, outlining plans to diversify export markets. Initiatives include scaling trade missions, enhancing the National Exporter Development Programme, and establishing an Export Support Desk. A support package for vulnerable companies, producers, and workers will be detailed soon. SARB Governor Lesetja Kganyago previously warned of risks to over 100,000 jobs in autos and agriculture.
June CPI data, due Wednesday, is expected to show a rise to 3.1% y/y from 2.8% in May, still well below the inflation target midpoint, of 4.5% y/y. Core CPI is expected to remain steady at 3.0% y/y. The subdued inflation and growth points to a repo rate cut, and as such the markets have priced in a 25bps repo rate cut at the upcoming MPC meeting. Discussions about a lowering of SA’s inflation target have added uncertainty to the path for monetary policy going forward, but this announcement is only expected in the next few months.