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Media Centre | COSATU Press Statements
COSATU condemns rise in lending rates
7 December 2006
The Congress of South African Trade Unions is appalled by today`s decision of the Monetary Policy Committee of the Reserve Bank to raise base lending rates by yet another 50 basis points, to 9%.
COSATU sees the Reserve Bank inflation targeting policy, through the use of the interest rate tool, as a major deviation from the developmental agenda that South Africa needs. The imprudent policy of dealing with inflation as a key economic challenge remai ns problematic for a developing country that faces major problems such as high unemployment, mass poverty and sluggish growth. Inflation targeting is a policy adopted by countries with developed economies and unemployment below 10%. It is totally unsuitabl e for a developing economy like South Africa, which has massive problems of unemployment and poverty.
While it would be crucial to have a macro-economic strategy that ensures an appropriate mix between fiscal and monetary policy, COSATU sees fiscal and monetary policy going in two different directions. The growing and positive trend over the past few years , of increasing fiscal spending on social security, infrastructure and poverty alleviation measures, is intended to stimulate economic growth, reduce poverty and create jobs.
Meanwhile the interest rates increase will snuff out the glimmer of hope of increasing economic growth, especially in manufacturing industry, and of providing cheap capital to small business. It will make housing inaccessible to many ordinary workers and a ttract an influx of speculative investment. This policy will destroy still more jobs and sabotage prospects of halving unemployment and poverty by 2014.
COSATU would welcome a review of the current inflation targeting measure as well as a review of the current bands that would take into consideration the developmental and growth agenda required to reduce unemployment and poverty
Patrick Craven (National Spokesperson)