The JSE has fully recovered the 17% drop since 10th May and is at record levels yet again. With the oil price back to the $50-60 range, supporting expected lower international inflation levels and complimenting global market sentiment. The local market experienced some emerging market jitters with the current account deficit adding to the impact on the local economy reflected in the depreciation of the South African Rand against all major currencies. This concern, accompanied with inflation fears has set the trend for further monetary policy tightening for 2006.

Since middle May the world markets have taken some punishment due to inflation fears. SA did not escape the jitters and the market took a crunch the month of May with a continued sell off in June. The weakness in the Rand has been driven by emerging market jitters evidently heightened the Reserve Bank's concern, especially since, just prior to the Bank's interest rate announcement, other central banks in emerging markets had already announced a tightening in their monetary policy. This reasoning is key to the outlook for domestic monetary policy.