The Taquanta Stable Income SNN Fund will change it's name to Taquanta Stable Income FR Fund, effective from 07 September 2023

On the 24th of November, the South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) raised the repo rate by 75 basis-points (bps) for the third consecutive meeting, from 6.25% to 7.00%. While the decision to hike interest rates was broadly anticipated, the magnitude thereof was seemingly void of consensus. Three members of the MPC voted for the increase, while two voted for a more measured 50 bps hike. The latest increase in interest rates has now fully reversed the 2020 cutting cycle while adding 50 bps to pre-covid policy levels. The SARB’s Quarterly Projection Model’s (QPM) forecast for the terminal repo rate is currently at 6.83%. This implies that if inflation expectations over the next 12 to 18 months do not surprise to the upside, 7.00% is therefore the tentative peak in the prevailing hiking cycle. Notwithstanding muted second round effects, a weaker U.S. dollar, and the capitulation of global oil prices from growing macroeconomic headwinds, the SARB continues to see upside risks to the near-term outlook in consumer prices. Headline inflation was revised up to 6.7% from 6.5% in 2022, and 5.4% from 5.3% in 2023. The 2024 and 2025 forecasts continue to be anchored at the midpoint target range of 4.5%. Policymakers remain resolute in their battle to contain inflation, unrelenting on a move closer towards their respective targets before victory can be declared in the battle to rein in price growth. On the other hand, our developed market counterparts (whom we have front ran in the current hiking cycle) have recently noted their consideration of the cumulative impact of interest rate hikes and the lags at which they affect the economy. According to the International Monetary Fund (IMF), one-third of the world economy will likely contract this year, as industrial activity appears increasingly fragile in absorbing aggressive monetary tightening. Our view is that in the absence of costs associated with trade wars and supply-side rigidities, a moderating macroeconomic backdrop is unlikely to maintain elevated inflationary pressures. Forward guidance obtained from the FOMC, SARB and FRA market also imply a reduced pace of interest rate hikes, largely informed by falling price expectations over the short-to-medium term. In the SA money market, the 3-m JIBAR rate rose 68.3 bps m/m to end the month at 7.200%, while the 12-m JIBAR rate increased by 14.2 bps m/m to 8.525%. In the last 12 months, these rates increased by 333 bps and 313 bps, respectively.

The Taquanta SNN Interest Income Fund will change it's name to Taquanta Stable Income SNN Fund, effective from 3 November 2022.