Last week, inflation fears gripped markets as the US CPI print for January surprised on the upside. Locally, it was an eventful week that started with US President Donald Trump’s accusations of human rights violations against white farmers in SA.
International Market Developments
US Inflation accelerated in the first month of 2025. The headline CPI increased 0.5% month over month in January. The increase is faster than market expectations of a 0.3% rise and lifted the annual rate from 2.9% to 3%. Core CPI also came in hotter than expected, climbing 0.4% monthly in January after a 0.2% increase in December and bringing the annual rate up from 3.2% to 3.3%. Forces driving the upside surprise in January were broad-based. The CPI for energy climbed 1.1%, while food inflation rose 0.4%. Shelter inflation was mild.
On the global monetary policy front, US Fed Chair Jerome Powell’s congressional testimony drew significant attention from investors. Jerome Powell reaffirmed that the Fed sees no immediate need to adjust its policy stance, a position supported by strong economic data. The labour market remained strong, with unemployment edging lower and hourly earnings rising. In addition, jobless claims fell in early February. Meanwhile, consumer inflation unexpectedly accelerated in January, further above the Fed’s 2% target. However, Powell cautioned against overreacting to a single month of data, emphasising that restrictive policy needs time to bring inflation down. Powell’s remarks and the latest data suggest that policy changes remain on hold for now, with the Fed prioritising patience as it assesses inflation trends.
Looking ahead, both the UK and the US will release their February flash PMIs in the coming days, with the UK also set to publish January consumer and producer inflation, retail sales, and February consumer confidence.
Local Market Developments
Last week, US President Donald Trump accused South Africa of human rights violations against white farmers. Accusations were accompanied with a freeze of all aid towards SA and a promise to allow Afrikaners to apply for refugee status in the US. Later in the week, the US said they could be ‘resettled’ in the US. Details on what this means are still very sparce. The US embassy in SA provided more clarity on PEPFAR – the US President’s Emergency Plan for AIDS Relief – which faced uncertainty following Trump’s executive order halting aid to SA. Given that PEPFAR funds 17% of SA’s HIV/AIDS programme, its potential suspension raised serious concerns. This week, the US embassy confirmed that PEPFAR activities will resume under a limited waiver granted by US Secretary of State Mark Rubio in January.
Looking ahead, Stats SA is scheduled to release January’s CPI data, which is expected to have ticked up slightly. January’s CPI will be the first print to fully reflect the changes made to the composition and weighting of the CPI basket, as well as the rebasing. The most important event will be on Wednesday afternoon when Finance Minister Enoch Godongwana delivers the 2025 Budget Speech where he is expected to maintain his focus on fiscal discipline.