If all goes well, SA and US borrowers can look forward to an at least 25-basis point (bp) reduction in interest rates, spelling the beginning of a declining interest rate cycle. There are hopes that one or both central banks will announce a bumper 50-bp cut at one of their upcoming meetings, with analysts believing this would be justified because of the restraint shown by the central banks over the past year. But investors aren\u2019t yet pricing this in.<\/p>\n
SARB Governor still circumspect, investors optimistic:\u00a0<\/strong>While the SA Reserve Bank\u2019s Governor Lesetja Kganyago has struck a circumspect tone, a lower-than-expected July inflation rate sets the scene for a long-awaited rate cut \u2013 and possibly further rate cuts before year-end. However, economists caution that the South African rate-cutting cycle will likely slow.<\/p>\n Kganyago is still concerned about inflation risks. He last said at the central bank\u2019s annual meeting that inflation remains a major policy concern for central banks. However, he acknowledged that lower inflation would \u201copen monetary policy space and support easier credit conditions.\u201d<\/p>\n US Fed chair says the time has come:\u00a0<\/strong>Meanwhile, in the US, Federal Reserve chair Jerome Powell couldn\u2019t have been clearer, saying \u201cthe time has come\u201d for rate cuts. The US central bank has more reason to fast-track its rate-cut trajectory than SA. Signs of a tightening labour market are raising concerns that unemployment rates could rise if the central bank doesn\u2019t soften its hold on monetary policy.<\/p>\n The bottom line:\u00a0<\/strong>From a macroeconomic perspective, the interest rate outlook looks bright, with a September rate cut considered highly likely in the US and a firm possibility in SA. However, investors should maintain a stance of cautious optimism because of the mounting geopolitical risks clouding the global landscape.<\/p>\n As August came to an end, Israel and Hezbollah, a proxy for Iran, were exchanging heavy fire in what is considered a major escalation that raises the potential of an all-out war. The Middle East hostilities pose the most significant risk to the interest rate and inflation outlook due to the impact they would have on oil prices.<\/p>\n While the impact of an interest rate cut will vary depending on your circumstances, here are a few ways interest rate cuts typically tend to play out.<\/p>\n NB: The generalised trends above are just that. If you have any questions about how all of this affects your investment portfolio, please give us a ring.<\/strong><\/p>\n Disclaimer:<\/strong>\u00a0The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.<\/p>\n \u00a9 FinDotNews<\/p>\n","protected":false},"excerpt":{"rendered":" SA and US interest rate cuts on the cards in September If all goes well, SA and US borrowers can look forward to an at least 25-basis point (bp) reduction in interest rates, spelling the beginning of a declining interest rate cycle. There are hopes that one or both central banks will announce a bumper […]<\/p>\n","protected":false},"author":101019,"featured_media":5575,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[59],"tags":[],"class_list":["post-5571","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-market-update"],"yoast_head":"\nWhat would a cut mean for investors<\/h6>\n
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