ECONOMIC AND MARKET OVERVIEW

Central banks in major economies - including the United States, Eurozone, and Japan - held interest rates steady, signalling a pause in their rate cycles. Inflation continued to ease, with consumer price indices trending below prior peaks, allowing policymakers to focus on growth without stoking price pressures. Global employment remained robust, with unemployment rates near historic lows in several regions. Wage growth was moderate, balancing inflation concerns with sustained labour demand.

Jerome Powell’s August 2025 Jackson Hole speech - his final as chairperson of the US Federal Reserve - was a nuanced reflection on the evolving US economic landscape and the Fed’s policy stance. He signalled a shift away from the 2020-era Flexible Average Inflation Targeting (FAIT). The Fed is now embracing a more flexible inflation goal and a qualitative approach to assessing maximum employment. Following his speech, the market seemed to price for an interest rate cut being announced at the Federal Open Market Committee meeting in September.

In Europe, macro-economic news was mixed. GDP rose marginally, indicating a fragile recovery. In addition to this, retail trade sales increased, suggesting resilient consumer demand despite broader economic uncertainty. Industrial production and construction output unfortunately declined across most EU states. Unemployment rate remained unchanged overall, but the silver lining is that youth unemployment decreased in the euro area.

The South African Reserve Bank (SARB) revised its 2025 GDP growth forecast down to 1.0% (from 1.2%). Weak external demand and domestic investment constraints contributed to the downgrade. There was some good news, though as inflation remained below the 4.5% midpoint target. The Reserve Bank, however, flagged potential upside risks due to electricity price adjustments. Despite disinflation, the governor signalled limited room for rate cuts, citing currency volatility and US policy spillovers.

China reaffirmed its 5% GDP growth target despite mounting headwinds. In this pursuit Beijing announced a record-high fiscal deficit (4% of GDP) and launched ¥4.4 trillion (over USD 600 billion) in local government bonds for infrastructure and housing. In addition, they also issued ¥1.3 trillion (USD 180 billion) in ultralong treasury bonds for national security and innovation, as well as ¥500 billion (USD 70 billion) in sovereign bonds to recapitalize state-owned banks.

Immigration remains a sensitive matter in Europe and the United Kingdom. The UK signed a new bilateral agreement with Iraq to expedite the return of failed asylum seekers. This is part of a broader strategy to curb Channel crossings, which surged to over 27 000 attempts year-to-date. This is up from 18 000 in the same period last year. In the rest of Europe many countries are struggling with the integration of migrating people from the Middle East, Eastern Europe and North Africa. Immigration policy is likely to be central to the next general elections in Western Europe and the United Kingdom.