#monetary-policy

#monetary-policy

Monetary policy remains the central variable. While markets expect the Fed to cut interest rates if U.S. economic data show sufficient cooling, the European Central Bank (ECB) is inclined to keep its deposit rate steady at 2%. This divergence allows the U.S.-Eurozone real yield spread to narrow, thereby providing short-term support for the euro.

He is breaking with decades of precedent and allegedly the law to attempt to fire Lisa Cook, a Biden-era appointee to the bank's board of governors. It appears to be part of his campaign to demand lower interest rates, which is a lousy policy when inflation hasn't quite cooled. Trump has done little otherwise to bring prices down. His aggressive tariff regime, certainly, will punish many families - especially when it's not coupled with a new industrial policy or jobs program.

There is a lot of dramatic commentary on this but I wouldn't exaggerate the 30-year bond rate, he said. It's a number that gets quoted a lot. It's quite a high number. It is actually not a number that is being used for funding at all at the moment.

Samir Dedhia, CEO of One Real Mortgage, noted in commentary last week that rates are near their lowest levels since October 2024, not long after the Federal Reserve began to implement a series of cuts to benchmark rates that totaled 100 bps. Rates have now dropped nearly half a percent from their January highs, giving homebuyers and homeowners more breathing room to explore options, Dedhia said.

From the "Love Island" villa to the Coldplay "kiss cam," it's been a summer full of interesting relationships. However, President Donald Trump and Fed Chair Jerome Powell's relationship, or lack thereof, has the biggest impact on the business world. Powell's decision to keep rates steady this summer only fueled the fire. And Trump's ire for Powell has now extended to some of his colleagues, who are also fighting back.

At its annual jamboree at Jackson Hole, Chair Powell signalled his apparent support for a rate cut later this month, stating that the softening labour market could offset the inflation risks from Trump's tariffs. The market had already been anticipating a 0.25% cut on 17 September but this cemented expectations and last week's crop of US data did little to change things.

Mid-cap and small-cap indexes outperformed, while the technology-heavy Nasdaq slipped as investors took profits from this year's strong run in artificial intelligence-related stocks. The Fed remains the central focus. Powell acknowledged that inflation remains a challenge but also highlighted weakening signs in the labor market. He noted that interest rates are currently at restrictive levels, and the balance of risks may be shifting toward employment. His comments raised expectations that the Fed could begin lowering rates soon.

"curious kind of balance that results from a marked slowing in both the supply of and demand for workers."

CPI inflation accelerated more than expected to 3.8% in July, driven by faster transport and hospitality inflation. Services inflation also rose to 5.0%, further cementing the existence of persistent price pressure in the economy.

The dollar's stability is bolstered by positive trade developments, including potential tariff agreements between the US and Europe, which ease uncertainty in the market.

South African equities experienced a notable decline on Friday, with the JSE FTSE All Share Index falling below the critical 100,000-point mark due to fading market momentum.

Recent dovish remarks from Fed Governor Waller reinforced expectations of future rate cuts, potentially boosting silver prices as market participants anticipate monetary easing.