Global monetary policy remained very accommodative over the quarter. The FED kept interest rates unchanged while revising their growth forecast for the US economy from 4.2% to 6.5% for 2021. This is projected to be accompanied by a lower unemployment rate which is estimated to come in at 4.5%.
Volatility in the bond market remained elevated as continued global stimulus and liquidity triggered inflationary concerns over the quarter. This was further exasperated by the re-opening of global economies which is projected to release significant pent-up demand. The local bond index fell 1.7% as longer-dated SA rates tracked higher global yields. The SARB kept interest rates unchanged given benign inflation while the model projected two 25 basis point hikes to come in 2021. While CPI remained at the lower end of the SARB’s target range, it is likely to increase in the months to come amid hikes in electricity tariffs and the petrol price.