When the US Federal Reserve changed its interest rate policy guidance in favour of data dependence at its January meeting, it established a new pivot for the macroeconomic and financial markets outlook for 2019. Fed funds rates are pricing in only a 7% probability of one rate hike in 2019 and an 18% probability of one rate cut by the first quarter of 2020. As a result, the US dollar is now expected to weaken, which by implication means emerging-market currencies are expected to strengthen against the greenback. Historically, a weaker US dollar has been associated with stable inflation, fewer interest rate hikes by global central banks, improved commodity prices, a recovery in equities and emerging-market growth outperforming that of advanced economies. This would be the perfect global backdrop for SA’s macroeconomic policy setting and investment outlook, but there are several macroeconomic risks that both local policymakers and investors need to seriously consider for the next 12 to...

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