Many investors are anticipating the central bank will start lowering rates in June
The JSE was firmer on Wednesday, while its global peers were mixed as investors focused on the conclusion of the Federal Reserve's monetary policy meeting.
Markets are expecting the policymakers to keep interest rates unchanged when it concludes its two-day federal open market committee (FOMC) in the evening.
Investors will, however, pay close attention to the central bank’s guidance for the future direction of interest rates.
Many investors are anticipating the central bank will start lowering rates in June, with some concerned a recent spate of hot inflation reports could result in even fewer cuts than markets are anticipating, reported Bloomberg.
“Markets are expecting the Fed to keep rates on hold but will watch Fed Chair Jerome Powell's press statement after the meeting for clues as to when the Fed will start cutting rates,” said TreasuryONE currency strategist Andre Cilliers.
“Traders are concerned that the Fed could be less dovish in its outlook, and therefore will be paying close attention to the quarterly update on the economy after the interest rate announcement, with a specific focus on GDP, Inflation, and unemployment,” added Cilliers.
The JSE all share gained 0.77% to 72.419 points and the top 40 0.8%. Precious metals rose 3.35%, resources 2.1% and retailers 1.43%.
Anglo-American Platinum led the gains in the precious metals sector, rising 7.49% to R733.90.
At 5.50pm, the Dow Jones industrial average was 0.25% firmer at 39,127 points, while markets were mixed in Europe.
Locally, headline consumer inflation rose 5.6% year-on-year in February, from 5.3% increase in January, and slightly above the consensus of 5.5% increase. Monthly headline inflation was 1.0%.
The core inflation, which strips away volatile food and oil prices, rose 5.0% year-on-year, from 4.6% previously.
“Headline inflation has ticked higher once again, getting closer the Reserve Bank’s 3% to 6% range ceiling. The news doesn’t bode well for expectations of rate cuts in our local economy for the first half of 2024,” said IG senior market analyst Shaun Murison. “The rand’s reaction to the CPI print was to strengthen off the day’s worst levels, on the prospect of higher for longer rates domestically.”
“This initial move will be tested though as we lead into this evening's Fed’s rates decision and policy statement. While no change is expected today from the world’s largest economy, markets continue to look for clues as to when we could see US rates start to ease,” said Murison.
At 5.45pm, the rand had strengthened 0.56% to R18.8028/$, 0.67% to R20.4071/€ and 0.52% to R23.8967/£. The euro was 0.11% weaker at $1.0853.
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