Fed Rate Cut Odds Rise: Rand Holds Steady Amid Global Uncertainty

The latest TreasuryONE and ETM Analytics weekly market review focuses on developments following Jerome Powell’s remarks at the Jackson Hole Symposium. Powell confirmed the Federal Reserve’s dual mandate of inflation stability and maximum employment, noting mixed signals in job creation, a slight rise in unemployment, and stable inflation. Markets interpreted his comments as a strong indication that rate cuts are likely in September.

Attention now turns to the release of the Fed’s preferred inflation gauge, the PCE deflator, due Friday. While consumer spending has shown signs of pressure, any significant upside surprise in spending could cause the Fed to delay cuts. Analysts expect spending to remain subdued, limiting the likelihood of unexpected inflationary pressure.

Currency strategist André Cilliers explained that the U.S. dollar came under pressure last week as markets priced in an 80–85% probability of a September rate cut. The rand opened the week at R17.45/$ before stabilising around R17.50/$, largely influenced by dollar weakness rather than domestic developments. He cautioned that a surprise decision not to cut rates could trigger renewed dollar strength.

For now, the rand remains locked in a well-established trading range of R17.60–R18.00, with little sign of a breakout in the short term. Cilliers noted that speculation may increase as the Fed meeting approaches, but absent major shocks, the outlook for the next two weeks is one of relative stability.