In this week’s market review by ETM Analytics and TreasuryONE, we discuss the South African economic landscape as the nation approaches its elections. Amidst the political noise, the latest inflation figures for South Africa show a promising moderation, maintaining below the 6% threshold but still short of the optimal 4.5% target.

Predictions for the near future include potential reductions in fuel prices, although upcoming changes in administered prices like electricity could pose challenges. As the monetary policy committee meeting looms, no changes in interest rates are anticipated immediately, with any adjustments expected to align with trends in the US later in the year.

The discussion also delves into global economic indicators, highlighting the Fed’s recent stance against rate hikes, despite ongoing concerns about inflation control. This mirrors expectations of easing market pressures, as evidenced by the sell-off of inflation-linked bonds.

Economically, various data points like GDP growth and unemployment rates suggest a fragile recovery, influencing forecasts of interest rate cuts. The weakening of the dollar in recent weeks has notably bolstered the South African Rand, offering a glimpse of potential currency stabilisation.

The upcoming elections hold considerable influence over market sentiments, with recent polls and developments stirring discussions around possible electoral outcomes. The barring of Zuma from parliamentary candidacy adds a layer of complexity, particularly affecting the dynamics within the KwaZulu-Natal region. As the election day nears,we take a look at the broader impacts of the voting process and potential coalitions.

Despite the uncertainties, there’s a cautious optimism about the Rand’s performance, supported by a reduction in election-related risk premiums. The next market review promises a closer look just days before the elections, aiming to unravel the complexities of these influential factors and their potential economic consequences.