The US Fed may be changing course.
At Jackson Hole, Federal Reserve chair Jerome Powell flagged risks in the labour market, raising hopes for a rate cut.
Powell warned that the risks of higher inflation and a weakening jobs market add up to a "challenging situation".
"Downside risks to employment are rising," Powell said in his speech, warning that these challenges could materialise quickly in the form of layoffs.
"While the labour market appears to be in balance, it is a curious kind of balance that results from a marked slowing in both the supply of and demand for workers," he noted.
He added that "the effects of tariffs on consumer prices are now clearly visible" and expected to accumulate over the coming months.
He also said there is high uncertainty about the timing and extent of the tariffs' impact.
But he vowed: "We will not allow a one-time increase in the price level to become an ongoing inflation problem."
Confronted with these dual challenges, Powell alluded to a possible rate cut: "With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance."
Citadel Global director Bianca Botes says markets are now pricing in an 85% chance of a September cut in the US, with expectations for further cuts into 2026.
International central banks often follow the US because its economy and dollar play a key role in global trade and finance.
So, what does this mean for South Africa?
And can we expect the Reserve Bank to follow suit?
In July, the Monetary Policy Committee (MPC) cut the repo rate by 25 basis points to 7%.
This pegged the prime lending rate at 10.5%.
Reserve Bank governor Lesetja Kganyago, however, emphasised current global uncertainties as potential upside risks to inflation.
These risks notably include the 30% tariff that was slapped on South African exports. US tariffs can raise import costs, pushing prices higher and adding upward pressure on inflation.
Furthermore, Kganyago indicated that the MPC would now aim for the bottom end of the 3% to 6% inflation target band in its modelling, potentially signalling a halt to the rate-cutting cycle.
KPMG lead economist Frank Blackmore says it’s still unclear whether or not there will be a rate cut in September. The latest inflation print for July rocketed to 3.5%, up from 3% in June.
Blackmore says multiple cuts could be possible, but it will depend on whether economic players move their expectations towards the 3% inflation target in their price planning for goods and services.
For now, all eyes remain on the next Fed and Reserve Bank meetings. While global momentum seems to be shifting toward monetary easing, South Africa faces a more complex balancing act. Rising inflation, tariff pressures, and global uncertainty may keep the Reserve Bank cautious. Markets may be betting on cuts, but local conditions will ultimately decide how far and how fast interest rates fall.