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The recent decision by monetary policy makers in the US to keep rates unchanged has sparked hope of an end to a bruising interest rate cycle globally. Central banks across the world have battled soaring inflation, leading to mantra of ‘higher interest rates for longer.’ So is the end near? In the latest episode of the No Ordinary Wednesday podcast, Investec Chief Economist Annabel Bishop gives an in-depth analysis on what this means for financial markets, investors and the rest of world.

Podcast highlights

  • Driving factors behind the Fed rate decision

    “We have seen that there has been some data coming out that's indicated that the tightness of credit conditions of financial market conditions has really had some impact on borrowings on consumers, tightening in lending and all that points to the fact that higher interest rates in the US have done their work. They've had a suppressing effect on consumer demand. In turn that is expected to continue to have a suppressing effect on inflation.”

  • Market reaction

    “I think there's certainly a sense that things could improve from here on out and it's actually quickened the interest rate cut trajectory that's being projected by financial markets for next year. The expectations or if you will, the implied Fed funds future rate, that's really saying that US interest rates could happen quicker than was previously anticipated next year, instead of being in the second half of the year, coming through in the second quarter.”

  • Global interest rates outlook

    “We just need to bear in mind that if shocks come through in the system, there are still risks. We haven't seen an end to the Israeli-Hamas war. We don't think that's going to be something that happens quickly. Of course, as well, the Russia-Ukraine was also continuing as well. So, all of these factors haven't gone away.”

  • Interest rates to remain unchanged in SA?

    “Our Reserve Bank is characterised by hawkishness, that it would be highly unlikely for them to cut interest rates, in the remainder of this year or the early part of next year. They are worried about inflation, and particularly the anchoring of inflation expectations. I think that interest rates will be left on hold, perhaps there might be a couple of people thinking that we might need a hike, but that's likely to be the outcome.”

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