By Calvin Crick
From September this year, several central banks globally are expected to deliver their first interest rate cut in many years. US Federal Reserve Chair Jerome Powell was the latest to offer his blessing for the start of interest rate cuts, recently telling an audience of economists and policymakers that the time has come for policy to adjust.
An interest rate cut would depend on the US consumer inflation rate reaching its central banks 2 target and the state of the labour market. However, market watchers have interpreted Powells comments as the US central bank preparing to cut interest rates at its mid-September meeting by between 25 and 50 basis points.
The South African Reserve Bank will watch the US central banks moves closely. It appears the Reserve Bank has been waiting for the US central bank to start cutting before it embarks on its own interest rate-cutting cycle.
As it turns out, several economic developments in recent weeks are paving the way for the Reserve Bank to prepare for an interest rate cut in September. It would be the first cut since the bank started raising rates in November 2021.
