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In an unexpected move, the US Federal Reserve (US Fed) cut its federal funds rate again in October, following a reduction in September. US President Donald Trump and Chinese President Xi Jinping met to discuss relations between the world’s two largest economies. Despite global headwinds and domestic challenges, China’s economy grew by more than 5% in the first three quarters of 2025. Japan made history by electing its first female prime minister after previous leaders resigned amid scandals and falling approval ratings. South Africa was removed from the Financial Action Task Force (FATF)’s “grey list,” a milestone that reflects the success of a whole-of-government effort to restore confidence in the country’s financial system.

Fed cuts rates for the second time in 2025

The US Fed implemented its second interest rate cut of the year at the October meeting of the Federal Open Market Committee (FOMC), aiming to boost the labour market despite inflation remaining above its target. The committee voted to reduce the federal funds rate by 25 basis points, setting a new range of 3.75% to 4%. This follows a similar 25-basis-point cut in September, which was the first this year.

Fed officials have been closely tracking economic indicators that showed a recent slowdown in job growth as businesses contend with trade and immigration shifts. At the same time, inflation has continued to rise, partly due to tariff-driven price increases reflected in government data. These dynamics have complicated the Fed’s efforts to meet its dual mandate of maintaining price stability – anchored to a 2% long-term inflation goal – while supporting maximum employment. In its statement, the FOMC acknowledged risks on both fronts: job gains have weakened, and unemployment has ticked up, though it remains relatively low, while inflation persists at elevated levels.

Source: US Bureau of Labor Statistics

At the press conference following the announcement, Fed Chair Jerome Powell noted that while official September employment data is delayed, current indicators suggest layoffs and hiring remain low. He added that both households’ views on job availability and firms’ perceptions of hiring challenges have continued to ease. Powell said that goods inflation has risen but services inflation is still moderating. Short-term inflation expectations have generally increased this year, driven by tariff-related developments, as reflected in market and survey measures, although longer-term expectations are aligned with the Fed’s 2% target. He also emphasised that the September and October rate cuts were intended as insurance, bringing policy closer to a neutral stance amid tensions between the Fed’s dual mandate and the risks of higher inflation alongside a softer labour market.

China’s GDP projected to hit around 140 trillion yuan in 2025

Although the Chinese economy faces significant external pressures and domestic challenges, it grew by 5.2% year-on-year (y/y) in the first three quarters of 2025, according to data from the National Bureau of Statistics (NBS). Total GDP reached over 101.5 trillion yuan (approximately US$14.3 trillion) in this period. In the third quarter alone, GDP expanded by 4.8% y/y and 1.1% on a quarterly basis.

An NBS spokesperson said that China’s economic performance has remained broadly stable and has made notable progress, despite headwinds. Industrial output rose 6.2% in the first nine months compared to last year, with September posting a 6.5% increase, driven by strong growth in manufacturing and mining.

In October, during the 15th Five-Year Plan discussions, officials highlighted China’s continued leadership among major global economies. The head of the CPC Central Committee Policy Research Office projected that GDP would reach around 140 trillion yuan (US$19.65 trillion) in 2025. He said that China has surpassed key milestones of 110, 120, and 130 trillion yuan and now boasts a per capita GDP above the global average. He emphasised China’s role as a key driver of global growth. Looking ahead to the 2026-2030 period, the executive deputy director of the Office of the Central Committee for Financial and Economic Affairs said China faces a mix of opportunities and challenges amid rising uncertainties. However, he stressed that the economy remains resilient, with strong fundamentals and long-term growth prospects intact.

UK economy grows slightly ahead of key Budget

Official data showed the UK economy posted modest growth in August, as attention turned to potential measures in the upcoming Budget. The Office for National Statistics (ONS) reported a 0.1% expansion, supported by a 0.7% rise in manufacturing output. However, July’s figure was revised down from flat growth to a 0.1% contraction. While manufacturing drove August’s improvement, the services sector – which includes retail, hospitality, and finance – recorded no growth. The ONS noted that monthly figures can be volatile, emphasising their focus on three-month trends.

For the three months to August 2025, GDP grew by 0.3%, which was slightly higher than the 0.2% increase in the previous three-month period. “Economic growth increased slightly in the latest three months. Services growth held steady, while there was a smaller drag from production than previously,” said Liz McKeown, ONS Director of Statistics. Although the government has prioritised boosting growth, economists expect momentum will remain weak as households and businesses await Chancellor Rachel Reeves’ Budget announcements. Many analysts anticipate tax hikes or spending cuts to meet borrowing targets.

Source: Office for National Statistics

The Institute for Fiscal Studies (IFS) estimates that the chancellor will need to secure £22 billion to strengthen public finances and comply with fiscal rules, which will necessitate tax increases. The think-tank urged Reeves to take a bold approach in the upcoming Budget by creating a substantial financial buffer to avoid deeper spending cuts or further tax hikes later. Reeves said that she was considering additional tax and spending measures to ensure fiscal sustainability, reinforcing expectations that tax rises will feature in the Budget. There is speculation about the measures that might be introduced. Despite sluggish economic growth, analysts do not anticipate the Bank of England will cut interest rates at its next meeting, as inflation remains elevated at 3.8%.

For your interest

  1. Trump meets Xi for US-China talk
  • On 30 October, in Busan, South Korea, Trump and Jinping met to discuss relations between world’s largest and second-largest economies.
  • The Trump administration has tried to search for new pressure points with China, moving far beyond tariffs to export controls, port fees, visa restrictions, and sanctions. China has responded with its own expanded toolkit, hitting back with a range of measures that mirror many US actions. In the process, China has discovered which levers seem to be the most effective in dealing with the US.

(Source: Brookings, October 2025)

  1. Japan elects first female prime minister
  • Sanae Takaichi was elected Japan’s prime minister by its parliament in October 2025, making her the first woman to hold the office. A staunch conservative and admirer of the late former UK prime minister Margaret Thatcher, Takaichi takes over at a challenging economic moment. Japan is grappling with a rising cost of living and a frustrated public.
  • Takaichi is the fourth prime minister in just five years – her predecessors’ terms were cut short by plunging ratings and scandals.

(Source: BBC, October 2025)

  1. ECB inflation eases close to the target
  • According to a flash estimate from Eurostat, annual inflation in the euro area cooled to 2.1% in October from 2.2% in September and is now only slightly above the European Central Bank (ECB)’s 2% medium-term target. The figure matched expectations and adds to a string of data suggesting the post-pandemic cost-of-living crisis is being brought under control.
  • The core inflation rate, which strips out volatile items like food and energy, held steady at 2.4% – a notch above forecasts for a slight drop to 2.3%. That suggests that while headline inflation is easing, underlying price pressures – particularly in services – remain sticky.

(Source: Euronews, October 2025)

  1. South Africa removed from grey list
  • The FATF removed South Africa from its “grey list” of jurisdictions under increased monitoring. This is a significant moment for the country and a testament to the whole-of-government approach to restore the integrity of the financial system.
  • While the FATF’s initial grey-listing in February 2023 was a consequence of systemic weaknesses aggravated during the era of state capture, the South African Revenue Service (SARS) is acutely aware that it, along with other key institutions, was impacted and must continue to play a crucial role in preventing any future regression. The SARS Commissioner said: “We recognise that removing the designation of grey listing is not a finish line but a milestone on a long-term journey toward building a robust and resilient financial ecosystem”.

(Source: SARS, October 2025)

South African public sector capex rises for a third straight year

Public-sector capital expenditure on infrastructure and other fixed assets climbed to R276 billion in 2024 from R234 billion in 2023, marking the third consecutive annual increase after a five-year decline. However, spending remains below the 2016 peak of R283 billion. The public sector encompasses national and provincial departments, municipalities, public corporations, higher education institutions, and extra-budgetary accounts and funds. In total, 748 entities –are covered by the latest survey on capital expenditure.

The rise in 2024 was driven largely by investment in electricity infrastructure. Eskom increased its capital spending by R10.2 billion, from R39.3 billion to R49.5 billion, focusing on its capacity expansion programme and ongoing projects at Medupi and Kusile power stations. Rail infrastructure also saw significant investment, with the Passenger Rail Agency of South Africa (PRASA) boosting expenditure by R5.9 billion to R21.8 billion to restore key commuter lines and reopen routes such as Johannesburg-Naledi and Pretoria-Pienaarspoort. The South African National Roads Agency (SANRAL) raised its spending by R3.9 billion to R13.3 billion to accelerate road repairs and construction, while Transnet added R2.9 billion to maintain port, pipeline, and rail capacity. Other contributors to the R41.9 billion overall increase included major metropolitan municipalities (Johannesburg, Cape Town, and eThekwini), the Water Trading Entity, the Department of Water and Sanitation, and uMngeni-uThukela Water.

Market overview

Global overview

Developed market (DM) equities climbed for the seventh consecutive month in October, with the MSCI World Index ending 2% higher month-on-month (m/m) in US dollars. The mega-cap tech and AI cohort maintained its leadership position. Emerging market (EM) stocks outperformed their DM peers, with the MSCI EM Index ending positively at 4.19% m/m in US dollars. This was attributed to the performance of the Korean and Taiwanese chipmakers as the AI infrastructure spending boom showed no signs of stopping. The FTSE 100’s September gains of 1.86% m/m moved into October, when it rose by 3.71% m/m in pound terms. The S&P 500’s September gains – although a bit lower – continued into October, ending at 2.34% m/m relative to 3.64% m/m in the previous month, both in US dollars. Global bonds were in negative territory for the month at -0.25% m/m in US dollars compared to the previous month’s gains. Global property was also in negative territory in October at -1.50 m/m in US dollars compared to the previous month’s gains. The Euro Stoxx 50 Index gained 2.53% m/m in October from September’s 3.42% m/m gain in euros. The Dow Jones Index gained 2.59% m/m in US dollars in October, above September’s 2% m/m gains. The Nikkei was the biggest gainer for the month at 16.64% m/m in yen terms on the back of Sanae Takaichi being sworn in as Japan’s first female prime minister. Her new administration is expected to introduce fiscal stimulus and raise defence spending, providing a powerful tailwind for Japanese equities. This was also the Nikkei’s largest monthly gain in 35 years.

Local overview

The JSE continued its strong run into October, with the FTSE/JSE All Share Index gaining 1.64% m/m in rand terms, leaving the local bourse up 33.90% YTD. The source of the JSE’s return in October was decidedly different from the themes which dominated for the first three quarters of 2025. Precious metal miners were responsible for two-thirds of the JSE’s YTD performance in September, with gold and platinum miners rallying over those nine months. However, Resources detracted in October at -4.79% m/m. Property and Financials gained in October, at 7.84% m/m and 8.52% m/m respectively in rand terms, after posting losses in September. Industrials losses continued into October from September at -0.30% m/m. Cash was in positive territory for the month at 0.59% m/m in rand terms. The local bond market gains continued into October for short-, medium-, and long-term bonds. The FTSE/JSE All Bond Index ended the month positively at 2.56% m/m in rand terms. Bonds of 1-3 years were positive at 0.71% m/m, along with bonds of 3-7 years at 1.52% m/m. Bonds of 7-12 years were positive at 2.83% m/m, and bonds of 12 years and above were the biggest gainer for the month at 3.70% m/m. The rand weakened against the US dollar by -0.46% m/m but strengthened against the British pound and the euro by 1.99% m/m and 1.33% m/m respectively.

 

 

 

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