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Media Centre  |  COSATU Press Statements

Interest rates cut too cautious, says COSATU

11-12-08

The Congress of South African Trade Unions is deeply disappointed that the Monetary Policy Committee of the Reserve Bank has only reduced the minimum lending rate by a mere 50 base points (0.5%).

They have missed a great opportunity to make a substantial cut in interest rates, which could have helped to counter the massive danger of retrenchments and an economic slump in the wake of the world economic meltdown.

Such a small reduction will have a minimal impact on individuals battling to repay loans and bonds, or on businesses struggling against the combined effects of the ten previous interest rate increases and the impact of the world economic crisis. The 0.5% c ut will do next to nothing to save the thousands of jobs which are now under threat.

The Governor is still wedded to his irrational attachment to the policy of rigid inflation-targeting, regardless of the fact that the rate of inflation is now falling, and that the biggest challenge, now more than ever, is economic recession and rising une mployment, yet he has still kept interest rates high.

It is all the more astonishing that he took this decision at a time when governments around the world, many of them with very right-wing, neoliberal views, are slashing interest rates. In the UK for instance, the base lending rate is now only 2%, compared to South Africas 22.5%.

It is incredible that a developing country like South Africa, with nearly 40% unemployment, should be sticking to a rigidly cautious monetary policy when traditionally conservative governments of the developed countries are using interest rate cuts to save jobs and prevent a recession.

COSATU repeats its demand with even greater urgency for an interest-rate strategy based on targeting economic growth, job creation and poverty eradication. Without such a change, together with the other developmental policies in the Polokwane resolutions a nd the Alliance economic summit, there will be a catastrophic recession, thousands more lost jobs and millions more sucked into a life of poverty and hopelessness.

Patrick Craven (National Spokesperson)

Congress of South African Trade Unions

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