Last week, Donald Trump was won the 2024 US elections in a historic comeback. Trump claimed a convincing victory also winning the popular vote The Republicans also won control of the US Senate and retained a majority in the House of Representatives.
The US FOMC cut interest rates by 25 bps last week, as had been widely expected. Fed Chair Jerome Powell stated that he was ready to defend the Fed from political pressure, following the re-election of Donald Trump.
Global Market Developments
The US FOMC yesterday cut the Fed funds rate by 25 bps to a range of 4.5% to 4.75%; the decision was unanimous. The FOMC highlighted that the economic outlook remains uncertain that it “judges that the risks to achieving its employment and inflation goals are roughly in balance”. This suggests that the Fed is likely to follow a more measured and careful approach to rate cuts going forward as it pays attention to the risks to both sides of its dual mandate. US Fed Chair Jerome Powell noted that “this further recalibration of our policy stance will help maintain the strength of the economy and the labour market”. This will ensure further progress on inflation towards the bank’s target as the “bank moves to a neutral policy stance over time”. Powell also commented that he is ready to defend the Fed from political pressure following the re-election of Donald Trump.
Donald Trump’s victory as US president raises risks and uncertainty for the global economy. According to ECB Governing Council member Francois Villeroy de Galhau, Trump’s policies would fuel deficits and increase borrowing costs in the long term, should they be implemented. Trump’s protectionism with increased tariffs would also fuel inflation in the US and harm growth elsewhere in the world.
COP29: The climate change conference kicked off in Azerbaijan this week. The talks opened with urgent pleas and pledges of cooperation as the climate crisis accelerates faster than predicted. The UN has recently warned that the world is on track to see a “catastrophic” 3.1 degrees Celsius increase in temperatures by the 2050 deadline. Urgent action by world leaders is needed to agree on concrete measures to keep temperature rises to the 1.5 degrees Celsius agreed on at the Paris summit in 2015.
Local Market Developments
Locally, we had a relatively quiet news week. The Quarterly Labour Force Survey (QLFS) for Q3:24 is due out today; the unemployment rate is likely to come in at 32.8% in Q3:24, from 33.5% in Q2:24.
The Nedbank Economic Unit said that stable power supply, reduced policy and political uncertainties, and some improvement in global and local economic conditions boosted business confidence over the quarter, which could have resulted in a slight improvement in employment growth. However, a meaningful reduction in the unemployment rate is only likely to occur next year as structural reforms create space for moderately faster economic growth and potentially higher fixed investment.