JSE muted with focus on the Fed

The JSE closed little changed on Wednesday as investors awaited the outcome of the US Federal Reserve’s last policy meeting for the year.

The US central bank is widely anticipated to hold its benchmark borrowing rate steady at 5.25%-5.5% but, as has become the norm, investors will be paying close attention to chair Jerome Powell’s commentary for signals on rate cuts.

Locally, data from Stats SA shows consumer inflation cooled to 5.5% in November, down from a five-month high of 5.9% the previous month, and just below market forecasts of 5.6%.

The decline, driven by a fall in fuel prices that led to a notable cooling of transportation prices, is unlikely to prompt the Reserve Bank to cut rates.

“We do not expect the Reserve

Bank to cut interest rates any time soon given the persistent upside risks to the inflation trajectory posed by administered prices, recent currency weakness and geopolitically driven international oil and food prices,” said Sanisha Packirisamy, economist at Momentum Investments.

Earlier in the day, markets assessed fresh inflation data from the world’s biggest economy, where the producer price index was unchanged in November after decreasing 0.4% in October.

US consumer inflation for November rose in line with market expectations, while core consumer price inflation, which strips away volatile food and energy prices, matched the 4% annual pace set in October.

“The final Fed meeting of the year could also be the most eventful, with the central bank likely to acknowledge it’s done with tightening and even signal rate cuts next year,” said Oanda senior market analyst Craig Erlam.

“The interest rate decision itself will almost certainly be straightforward — on hold — but with new economic forecasts, the dot plot, a statement and the press conference to follow, there could be fireworks,” he said. “Investors love a Santa rally to see the year out and whether we do may well hang on how the central bank positions itself. Any acknowledgment of rate cuts next year could be well received.”

The JSE all share was little changed at 72,640 points, while the top 40 added 0.1%. At 6.38pm, the Dow Jones industrial average was barely changed at 36,594.47 points, while markets in Europe ended the session mixed.

At 6.10pm, the rand was 0.47% weaker at R19.0624/$. It also softened 0.41% to R20.5386/€ and 0.24% to R23.8437/£. The euro was little changed at $1.0787.