The South African Reserve Bank’s (SARB) Monetary Policy Committee meeting brought little in the way of surprises as lending rates remained unchanged (repo rate 5.75%). The dramatic drop in oil has eased inflationary concerns in the near-term as noted by Consumer Price Index (CPI) in December falling to 5.3%, half a percentage from the preceding month, aiding the decision to further the date at which continued monetary tightening will resume.
Reserve Bank Governor, Lesetja Kganyago, expects inflation to fall to 3.8% in 2015, significantly lower than the Reserve Banks’ previous forecast of 5.3%.
In Europe, “anti-austerity” political party, Syriza, were the victors at the Greek Parliamentary election. Alexis Tsipras, leader of Syriza eased concerns surrounding a Greek exit from Euro as he reaffirmed his commitment to the currency. Recent European Central Bank (ECB) stimulus actions perhaps found further justification in the week, as CPI flash estimate data suggested 0.6% deflation y/y in the Eurozone.
The Federal Open Market Committee (FOMC) kept current lending rates at record lows in the U.S. Federal Reserve Chairperson Janet Yellen in her address reaffirmed that the central bank would continue to exercise patience in terms of when the tightening cycle would commence. The Federal Reserve remained upbeat on the progress of the labour market and economy, although Q4 Gross Domestic Product (GDP) data fell short of consensus estimates with q/q growth reported at 2.6%.
The week ahead
The new week will see little in the way of scheduled data domestically to guide markets, although Gold and Foreign exchange reserves are set to be reported in the latter part of the week by the SARB. Arguably the most important data point of each new month, the U.S. will release non-farm employment data on Friday accompanied with the regions unemployment rate information.