A Brief Look Back at the 3rd Quarter…

Interest rates were left unchanged at the September Monetary Policy Committee (MPC) Meeting.  The SARB have kept interest rates on hold since March, citing a more benign view of inflation risk.

It is the view amongst some analysts that we may have reached the end of the interest rate hikes in this cycle.

The rand was volatile, trading in a range of USD 14.75 – USD 13.80.  The currency strengthened moderately in the quarter.

• Globally, supportive conditions remained in place, namely relatively firm commodity prices and a dovish stance by the US Federal Reserve.
• Locally however, political uncertainty contributed to volatility in late August and early September. Ongoing political uncertainty, deteriorating domestic growth momentum and failure to implement structural reforms will keep the rand vulnerable to a persistent risk of a ratings downgrade (and consequently, bouts of weakness).

CPI inflation was 5.9% y/y in August, marginally down from 6.08% y/y in July.

It is anticipated that CPI inflation will rise to about 6.8% y/y in November because of a combination of seasonal food price increases and higher fuel prices.

Global equities had a fairly uneventful third quarter.

• Generally, markets adjusted to the shock Brexit vote by weakening the pound – but maintained a reasonably positive view on the underlying UK economy, motivated by surprisingly strong economic data releases.
• The other major focal point remained the timing of US interest rate increases. Current expectations are that the next rate hike will take place in December 2016.

Source:  Coronation Fund Managers