RFA Breakfast Paper - July 23, 2024
South African Reserve Bank Holds Rates Steady Despite Rising Inflation
The South African Reserve Bank kept its repo rate unchanged at 7.0% at its July 23, 2026 policy meeting, surprising most analysts who had expected a 25-basis-point rate hike. The Monetary Policy Committee (MPC) voted 4–2 in favor of holding rates, opting to support South Africa's fragile economic recovery while acknowledging persistent inflation risks. Policymakers cited a modest improvement in the inflation outlook alongside weaker-than-expected economic growth, while reaffirming their commitment to gradually steering inflation toward the bank's 3% target. Governor Lesetja Kganyago cautioned that renewed conflict in the Middle East, which has pushed up global oil and fertilizer prices, could necessitate additional monetary tightening if higher fuel costs begin feeding into food prices and broader core inflation. Although South Africa's annual inflation accelerated to 5.0% in June, the SARB revised its 2026 average inflation forecast down to 4.0% from 4.4%, reflecting expectations that price pressures will moderate over the medium term. At the same time, the central bank raised its 2026 GDP growth forecast to 1.4% from 1.2%, while warning that economic momentum remains vulnerable and could weaken in the coming quarters. The decision signals that the SARB remains focused on balancing inflation control with supporting economic growth, while retaining flexibility to tighten policy if inflation risks become more entrenched.
U.S. Markets Pull Back as Rising Oil and Bond Yields Renew Inflation Concerns
U.S. equity markets closed lower on Thursday as WTI crude oil climbed above $90 per barrel amid geopolitical tensions and disruptions to key Middle East shipping routes. Higher energy prices renewed inflation concerns and pushed the 10-year Treasury yield toward 4.70%, while the U.S. dollar strengthened. International markets were mixed, with Asian equities mostly higher while European markets ended lower. The combination of rising oil prices, higher bond yields, and a stronger dollar created a more challenging environment for equities. Earnings also weighed on sentiment as Alphabet and Tesla shares declined following their second-quarter results. Alphabet’s earnings were broadly in line with expectations, but investors focused on its decision to raise 2026 capital expenditure to $195–205 billion. While the increase reinforces the durability of the AI infrastructure buildout, the negative share-price reaction suggests investors are increasingly focused on returns from these investments. Tesla also fell after reporting weaker-than-expected earnings. Despite these setbacks, S&P 500 earnings are expected to grow 23% year over year.
NGX Rebounds as Banking Stocks Lead Recovery from Previous Session’s Losses
The Nigerian equity market rebounded strongly in today’s session, with the NGX-ASI rising 0.98% to close at 247,831.40, while Market Capitalization gained 1.00% to ₦159.89 trillion. The market added 2,413.03 points and ₦1.58 trillion in value, supported by gains across all five major sectors. The additional listing of Linkage Assurance Plc’s Rights Issue contributed to the difference between the index and market capitalization performances. Banking stocks led the recovery with a 3.92% gain, followed by Industrial Goods (+1.27%), Insurance (+0.75%), Consumer Goods (+0.63%), and Oil & Gas (+0.04%). Renewed bargain hunting and strong buying interest in mid-cap and blue-chip stocks helped the market recover from the previous session’s losses. Despite the positive price action, market activity weakened as Total Volume and Total Value traded declined by 37.54% and 52.36%, respectively. Investors exchanged approximately 782.35 million shares worth ₦56.30 billion across 46,273 deals. The strong index gains alongside lower turnover suggest that investors concentrated their buying in selected large and mid-cap stocks. Overall, the session reflected improved sentiment, with the Banking sector driving the rebound, although the decline in market activity indicates that investors remain selective.
