SA consumer inflation up modestly in August to 4.8% Y/Y

South African consumer inflation rose modestly in August to 4.8 percent year on year, marking a slight increase from the previous month. Despite this uptick, overall inflation remains subdued, creating room for further monetary policy adjustments. Analysts have already factored in a 25 basis point rate cut, with market sentiments leaning towards a high probability of this anticipated move. In a recent interview with CNBC Africa, James Turp, Portfolio Manager at ABSA Asset Management, shared insights on the implications of the inflation data and upcoming interest rate decisions. Turp highlighted that while the current CPI numbers were favorable, driven by lower food and durable goods inflation, they align with expectations for a potential rate cut by the MPC. Looking ahead to the NPC meeting, Turp emphasized the high likelihood of a 25 basis point cut, with minimal chances of the committee maintaining rates or implementing a more aggressive cut. The focus also shifted to the upcoming FOMC meeting, where discussions on the reduction of the balance sheet are expected to take center stage. Turp noted that the market anticipates a 50 percent chance of a 25 basis point hike in December, influenced by recent inflation trends and the tightening of monetary policy. The conversation then shifted towards global geopolitical dynamics, particularly the impact of President Donald Trump's statements on market sentiment. Turp highlighted the market's growing resilience to erratic remarks, citing the need for stability amidst uncertainty. While certain geopolitical events, such as terrorism concerns in the UK, showed brief market reactions, the overall sentiment remained steady. In terms of currency movements, Turp discussed the stability of the Rand against the dollar and pound, attributing it to both demand dynamics and external factors such as Brexit uncertainty. Despite positive indicators from the UK, including strong economic data, concerns around Brexit negotiations continue to cloud long-term forecasts for the pound. Turp acknowledged the importance of UK-South Africa trade relations and expressed optimism for continued economic cooperation. Overall, Turp emphasized the importance of monitoring inflation trends, interest rate decisions, and geopolitical developments in shaping global market sentiments. As investors brace for potential policy shifts and navigate through uncertainty, a cautious approach to risk management remains essential in a rapidly evolving economic landscape.