Cosatu opposes interest rates hike 10-04-08

 

COSATU opposes interest rate hike

The Congress of South African Trade Unions is appalled that the South African Reserve Bank's Monetary Policy Committee (MPC) has announced today that it will raise the repo rate by yet another 50 basis points, bringing the rate at which it lends to banks to 11.5%. Within minutes some banks announced that their prime overdraft rates will rise by 0.5% to 15% from the current 14.5%.

Since June 2006 the MPC has raised interest rates by 400 basis points through a series of hikes. COSATU has opposed every one of them, but this latest increase must surely be the most outrageous. It will hit borrowers at a time when they are already reeling from the rocketing prices of food, fuel and electricity, all of which are likely to rise even higher in the near future.

It is incredible that the Reserve Bank believes that this policy is helping to reduce inflation, when it is clearly increasing inflation, by not only raising the cost of living for everyone who is repaying a loan but also indirectly by forcing companies to recover their higher loan repayments from their consumers by raising the price of their goods and services.

As COSATU has repeatedly said the policy of inflation-targeting is inappropriate for a developing country with high levels of unemployment and poverty. It will make it utterly impossible for us to meet even the modest ASGI-SA target of halving the 2004 levels of unemployment and poverty by 2014, and it condemns millions to remain jobless and poor.

The increase will hit thousands of small businesses, and discourage people wanting to raise the capital to expand or set up new businesses. This is bound to at least slow down economic growth and the rate of new job creation. It raises the real possibility of retrenchments at a time when unemployment is still far too high.

We call again on government and the Reserve Bank to recognise that our biggest economic challenge is to increase growth and cut unemployment and poverty. We repeat our call for the mandate of the Reserve Bank to be changed so that instead of narrowly fighting inflation it has a mandate to contribute to realising our employment and economic growth targets.

COSATU is launching its mass action against rising prices, and will now have to add rising interest rates to the issues that must be tackled. We demand that the increase be reversed and interest rates brought down.

Patrick Craven (National Spokesperson)

Congress of South African Trade Unions

1-5 Leyds Cnr Biccard Streets

Braamfontein, 2017

P.O. Box 1019

Johannesburg, 2000

SOUTH AFRICA

Tel: +27 11 339-4911/24

Fax: +27 11 339-5080/6940/ 086 603 9667

Cell: 0828217456

E-Mail: patrick@cosatu.org.za