By Johannah Malogadihlare
Trade union federations are unhappy with the SA Reserve Bank cutting the interest rate by 25 basis points, saying it could have done more.
Although some had hoped for a 50 basis point cut given the significant easing of headline inflation, the cut was in line with market expectations.
SA Federation of Trade Unions general secretary Zwelinzima Vavi said on Friday that the federation was disgusted by the Monetary Policy Committee’s decision.
“This quarter of a percent cut in the context of such an extremely high interest regime will not provide any reprieve for those struggling to meet their debt obligations. Most importantly, these unjustifiably high interest rates will continue to throttle the economy,” Vavi said in a statement.
He noted that the reduction did not translate to anything important for those struggling to honour their debt obligations.
Vavi highlighted that after Covid-19, the SA Reserve Bank increased interest rates to fight inflation, saying it was caused by “exogenous factors” including the war in Ukraine.
“Yet, despite its admission, the SARB continued to raise rates to levels unseen in recent periods,” he said.
The annual consumer price inflation fell to 2.8% in October — the lowest since the COVID-19 induced lockdowns four years ago, when it was at 2.2%.
Vavi said the mainstream commentariat celebrated these figures as proof of the effectiveness of the SARB’s inflation targeting.
“The SARB certainly pats itself on the back for a job well done. This is the best example of a surgeon declaring that the operation has been successful, but the patient has died,” he asserted.
While the Congress of SA Trade Unions welcomed the decrease, its spokesperson Zanele Sabela said the MPC did have room to make a bigger cut.
“Cosatu is disappointed that the Reserve Bank’s Monetary Policy Committee was not bold enough to cut the rate by more than the 25 basis points, given inflation is the lowest it has been since June 2020 at 2.8%,” Sabela said in a statement.
She added that the federation expected a much more ambitious cut, given the need for monetary policy to stimulate employment.
Meanwhile, the African National Congress said the cut would result in smaller installments on loans and less interest over the life of the loan.
“This is indeed a positive development for consumers and small businesses who will benefit from this cut. This important and progressive decision augurs well for the country, resulting in lower inflation, positive sentiment for the country and its credit rating,” said the ANC spokesperson Mahlengi Bhengu-Motsiri.
“The interest rate cut bolsters efforts to reduce the cost of high living in line with priority three of our election manifesto and the commitment we made to people towards a better life for all.”
Commenting on the inflation rate, the government acknowledged challenges some sectors faced and requested stakeholders to continue collaborating in efforts to build a resilient economy that benefited all people.
It has reaffirmed that it would continue to work on reducing costs not only on fuel but also in other critical areas.
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