Investors are bracing for a big week in terms of monetary policy changes. So much so, that a second assassination attempt on former US President Donald Trump on Sunday has, by and large, been shrugged off by the markets. Instead, trade is being driven by positioning for a potential outsized rate cut at the Fed’s policy meeting on Wednesday. This will be the main event of the coming week, which also includes interest rate decisions in China, the UK, and Japan. Of course, the SARB also has a monetary policy meeting that concludes on Thursday, with consensus expectations as per Bloomberg surveys, and positioning in the FRA market, pointing to a 25bp rate cut of the repo rate to take it to 8%. With the rand having appreciated around 2.70% since the SARB’s previous policy meeting, and the Fed also just about certain to start its monetary easing cycle this week, a rate cut in SA looks like a safe bet. August CPI data scheduled for release the day prior are unlikely to change the SARB’s decision, with disinflationary pressure now well and truly entrenched in SA.
One last topic that is worth covering this morning is the signing of the Basic Education Laws Amendment (BELA) bill into law on Friday. The DA previously said that this was a red line that would threaten its participation in the Government of National Unity (GNU), although it has since walked back this stance to some degree. Notably, President Ramaphosa decided to delay the implementation date for the most controversial clauses of the bill, which deal with issues of admission and language, by three months for further engagement between GNU partners. There is thus still some political risk in the air, although it appears the GNU is handling challenges in a politically mature manner.