Prowess Investments Market Update 11 – 18 Mar 2024

Last week investors kept a close eye on US inflation numbers as they looked for clues on the Fed’s next steps as far as interest rate cuts are concerned. Locally, President Cyril Ramaphosa reappointed SARB Governor Kganyago for another five-year term and announced Mampho Modise as the new Deputy Governor.

International Market Developments

The annual inflation rate in the US increased more than expected by 3.2% in February from 3.1% in January. On a month-on-month basis, CPI came in at 0.4% in February, from 0.3% in January. The February increase was driven by higher shelter and gasoline costs, which accounted for over 60% of the monthly increase in the index. Core CPI, which excludes volatile items such as food and energy, also came in higher than expected in February, at 3.8% year-on-year, from 3.9% year-on-year in January. CPI data may support the case for the Fed to keep rates steady when it meets later this week.

Looking ahead, the Federal Open Market Committee will meet on 19-20 March and is largely expected to keep the Fed funds rate unchanged. Investors will keep an eye on Fed Chair Jerome Powell’s comments after the meeting for clues on the timing of interest rate cuts. The Fed’s updated dot plot will also be available this week.

Local Market Developments

President Cyril Ramaphosa reappointed Lesetja Kganyago as Governor of the South Africa Reserve Bank for another five-year term ending on 8 November 2029. The president has also appointed Mampho Modise as Deputy Governor, following the resignation of Kuben Naidoo last year. The reappointment of Governor Lesetja Kganyago was positive for bond markets as it implies monetary policy continuity.

Looking ahead, the February CPI is due out on Wednesday and is expected to come in higher, at 5.5% year-on-year, from 5.3% year-on-year in January. Core CPI is also likely to come in higher, at 4.9% year-on-year in February, from 4.6% in January. Retail sales for January are also due out on Wednesday and are expected to have increased by 0.9% year-on-year, after having increased by 2.7% year-on-year in January.

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