Market panic and weaker rand – what it means for interest rates in South Africa

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Market panic and recession fears have shifted expectations for interest rate cuts in the United States – but it also has an impact on South Africa.

There has been a notable shift in interest rate expectations for the United States this week. This follows a market panic, which saw emerging market currencies take a beating, and investors started raising red flags about a possible recession in the world’s biggest economy.

“Manufacturing has also been soft, and the latest data points to fresh weakness in the US and elsewhere,” he said. Sebastian Mullins, Head of Multi-Asset & Fixed Income at Schroders, said that the long-talked-about “soft landing” for the US in terms of rates has now moved forward, with cooling inflation and retail sales holding up presenting enough of a reprieve for three rapid cuts before the end of 2024.

“The rand would weaken further on the publication of additional weak US economic data, but could strengthen if the data proves better than expected,” she said.

 

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