Lower interest rates set to remain

It would seem that lower interest rates are set to remain for a little while longer. Governor of the South African Reserve Bank, Tito Mboweni, is expected to follow international counterparts in this trend in the second half of the year.  

South African business confidence ticked higher in June but remains below levels from a year ago after weak economic data and power blackouts in the first half of 2019. An index measuring sentiment rose to 93.3 in June from 93 in May, the South African Chamber of Commerce and Industry said. Business confidence is important for economic growth and job creation, two of the biggest burning issues facing the local economy.

Global equities rallied the past week after the United States and China reached a ceasefire in the ongoing trade war, which helped push US large caps to record highs. The yield on the US 10-year Treasury note extended its drop to 1.95%. The low rates in the US paves the way for possible rate cuts that will stimulate the economy further. The current bull market in US stocks is now the longest in history. The S&P 500 has not experienced a drop of more than 20% since 9 March 2009, more than 10 years ago.

European leaders have nominated International Monetary Fund (IMF) Managing Director Christine Lagarde to succeed Mario Draghi as the president of the European Central Bank (ECB). Prior to running the IMF, Lagarde was the French finance minister. Markets welcomed the nomination by driving European yields lower in the expectation that Lagarde will maintain the ECB’s expansive monetary policy.

The Reserve Bank of Australia has lowered interest rates for the second consecutive meeting, cutting its official cash rate from 1.25% to a record low of 1%, in response to rising unemployment, a slowing economy and uncertainties surrounding global trade. Australia’s economy is growing at its slowest pace since the immediate aftermath of the global financial crisis.

It would seem that lower interest rates are set to remain for a little while longer. Governor of the South African Reserve Bank is expected to follow international counterparts in this trend in the second half of the year. 

 

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