THE SARB’S WORRIES ABOUT GLOBAL UNCERTAINTIES SUGGEST THAT THE CUTTING CYCLE MAY BE DONE
Bureau for Economic Research (BER)
Independent, objective and authoritative economic research and forecasting
The Week in Perspective written by Lisette IJssel de Schepper
This is an extract from the Weekly Review of 31 January 2025. The full Weekly can be found here (for free, but sign up if you want to receive notifications of new editions and other BER publications)
It was a big week for monetary policy, with several central banks, including the SA Reserve Bank (SARB), easing policy, the ‘biggest’ bank of all (the US Federal Reserve, Fed) keeping rates steady, and the Brazillian Central Bank aggressively hiking its policy rate. Broadly speaking, all decisions were in line with market expectations. With the exception of some temporary blips in yields and the gold price as markets digested Fed Chair Powell’s words while he was still speaking, there was no related market volatility.? That is not to say market developments were uneventful as a slump in the price of tech stocks created quite a stir. On the global data front, both the US and Eurozone GDP for Q4 disappointed relative to expectations – see the international section for more.
The tech-stock slump came as China’s DeepSeek cast doubt on the US’s dominance in the AI field. DeepSeek’s model is significantly less expensive, while its performance is only slightly worse relative to the more expensive developments. On Monday, Nvidia’s market capitalisation alone declined by almost $600 billion—roughly equivalent to Sweden’s annual GDP. The stock prices of chipmakers in Europe and Asia saw some recovery midweek due to strong company earnings data, but Nvidia continued to struggle, pulling US exchanges lower. Analysts argue that the relative cheapness of DeepSeek now forces market participants to reevaluate the longer-term potential of existing AI-related companies. This process may take some time.
CONTACT US
Editor: Lisette IJssel de Schepper Email: [email protected]
Click here for previous editions of this publication. Please refer to the glossary on the BER website for explanations of technical terms