The Minutes from the Federal Reserve’s June meeting took centre stage last week---almost all the Fed officials voted to pause in June to buy time to assess the impact of its monetary tightening so far---which is a cumulative 500 basis points to date….and the cracks from the tighter monetary conditions are starting to show up here and there…the non-farm payroll data, published on Friday, while still reflecting was softer than expected. But not sufficiently so to stop the Fed’s plans to bump rates by a further 25 basis points before the end of the year---this was also revealed in the

minutes and is in line with market expectations.

This may force other central banks to follow suit—including the SARB, which by the way, seemingly still has some way to go to pull inflation back within the target band. Meanwhile, in a recent radio interview, governor Lesetja Kganyago said inflation has turned a corner and he expects CPI to come in below 6% soon. At the same time, the Bureau for Economic Research

survey last week, showed inflation is expected to remain stubbornly high for the rest of the year going into 2024.

Either way, the outlook for the second half of 2023 is difficult to predict with a number of countervailing forces. You have the SARB which is likely to follow any rate hike put out by the Fed while risk aversion and lower commodity prices will weigh on the economy. As recessionary conditions take hold abroad, exports will come under pressure while a domestic recession will dampen demand for imports. It could pile pressure on the Rand---which already has a lack of resilience to external shocks.

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