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Media Centre | COSATU Press Statements
COSATU condemns intersts rate increase
The Congress of South African Trade Unions is outraged that yet again the Governor of the Reserve Bank and his Monetary Policy Committee have increased base lending rates by 50 points. This is the worst possible Christmas present for the people of South Af rica.
The policy of raising interest rates is having a catastrophic effect. By raising the cost of borrowing capital, it reduces the already low level of investment in new businesses and deters existing firms from expanding. It thus slows down economic growth an d the rate at which new jobs are created, and puts existing jobs in jeopardy as employers struggle to repay their loans.
As COSATU and many others have said, this policy of inflation-targeting is inappropriate for a developing country with massive levels of unemployment and poverty. It is making it utterly impossible for us to meet even the government's 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 policy is justified as necessary to fight inflation. Yet it means that people who already face skyrocketing increases in the price of fuel and food, made even worse by price-fixing, have to bear rising repayments on bonds and loan repayments. It thus m akes inflation worse!
We call again on government and the Reserve Bank to urgently review its disastrous inflation-targeting monetary policy and recognise that our biggest economic challenge is to increase growth and cut unemployment and poverty. We have repeatedly called for t he 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.