Will Reserve Bank come to the rescue?
GDP figures show need for urgent intervention
IT might be left to the South African Reserve Bank to stimulate the ailing economy with interest rate cuts after shock GDP figures showed a slump in consumer spending, signalling that the economy requires urgent intervention. The central bank's mandate is to achieve and maintain price stability through inflation targeting. Although monetary policy cannot contribute directly to economic growth and job creation in the long run, economists say that in the face of recession and the lack of capacity in the public sector to drive economic growth, the Reserve Bank will have to cut interest rates as early as next month to boost consumption, a major component of GDP. Johann Els, senior economist at Old Mutual Investment Group, said this week that the Reserve Bank's monetary policy committee "need to cut soon while they have a window of opportunity - this being a strong rand, lower inflation, a weak economy, a low current account deficit and a rating reprieve for the next six to 12 months". I...
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