Many people are speculating as to whether or not we may be in for an emergency interest rate cut.
This is because of South Africa’s poor economical performance in the last quarter of 2008, showing a 1.8% contraction in output. Many people are concerned that we are entering a recession and could soon follow in the steps of the United States where they are experiencing very serious financial problems despite plans of huge bailout packages.
Perhaps an emergency rate cut will work and stimulate some more consumer spending, however many people are already under so much pressure that a rates cut would merely decrease their monthly budget deficit and not give them any real money to spend.
It may just be too little too late and more drastic action may need to be taken as we watch basic commodities such as bread and milk skyrocket in price when they should have been becoming more affordable.
According to a Citigroup economist the Monetary Policy Committee is only likely to call an emergency meeting if the GDP drops by between 2% and 2.5% . So although there are many rumours it is unlikely that anything will happen before early next week.
What do you think? Will there be an emergency rate cut and will it help.
