Market Commentary | The week that was

Data released by the US Labour Department (12 January 2021) revealed that the country’s Consumer Price Index (CPI) climbed by 7% in 2021, the largest 12-month increase since June 1982. This is the highest CPI level recorded in 40 years, “sapping the purchasing power of American families and setting the stage for the US Federal Reserve (FED) to begin hiking interest rates as soon as March,” reported Bloomberg News.

Inflation will now be policymakers’ number one priority, through both fiscal and monetary measures. Monetary tightening by the FED would typically attract capital flows back to developed markets, which will be a challenge to developing economies if outflows are as sharp as the so-called taper tantrum in 2013. The expectation is the FED will increase rates in March, with a total of four rate hikes in 2022.

Locally, problems within the African National Congress (ANC) are making headlines ahead of the 2022 electoral conference of the country’s ruling party. The major question will be whether current President Cyril Ramaphosa will be re-elected for another term as party leader and head of the ANC for the 2024 elections.

Key announcements this week include local CPI figures for December 2020 to be announced on Wednesday (the expectation is 5.7%, up from 5.5% in November); data regarding the mining production and; retail sales data.