The labour federation Cosatu has urged the South African Reserve Bank not to raise interest rates.
The reserve bank’s monetary policy committee is expected to announce its decision on Thursday, with economists predicting a 25 basis point increase, which would take the repo rate to 7%, amid the ongoing US-Iran conflict.
Nedbank noted that rising global energy prices pushed inflation up from 3.1% in March to 4% in April, as businesses passed higher fuel costs on to consumers.
It added that inflation could increase further to about 5% in May.
Matthew Parks, Cosatu’s parliamentary coordinator, said the working- and middle-class households are already under pressure from the high cost of living, particularly rising oil and fuel prices.
Local economy growing at a slow rate
Most workers are drowning in debt and borrowing simply to buy food, electricity, and transport, while also servicing unaffordable debt levels,” Parks said.
“On average, those fortunate enough to have jobs support seven relatives. Many workers spend up to 40% of their already meager wages on transport.
“The cause of the current rise in inflation is solely due to the war in the Middle East and not domestic demand. There is nothing that South Africa can do to manage this geopolitical crisis of anarchy.
“Squeezing already struggling workers and consumers would make as much economic sense as decapitating a patient to resolve a migraine. It would be tantamount to further punishing the victims for a crisis not of their choice.”
He said the economy has been stuck at a low growth rate of 1% and warned that higher interest rates would worsen the situation.
He said inflation, at 4%, is still within the reserve bank’s target range and had been steadily falling before the war in the Middle East.
He added that once the war ends and global oil and gas supplies return to normal, local fuel prices and inflation should drop.
Push for fuel levy relief to continue
Parks emphasised that it is important for Treasury to continue fuel levy relief for as long as the war lasts and until fuel prices return to pre-war levels.
The central bank must resist any immediate, textbook temptation to raise the repo rate.
This would be a devastating blow to workers, consumers, business and the economy when we can least afford it.
“It must exercise strategic patience, more so as peace negotiations to end the war take place.
“The reserve bank must show solidarity with workers, the low-income households, and the economy by rejecting any increase to the repo rate,” said Matthews.
- Cosatu has urged the South African Reserve Bank not to raise interest rates amid rising global energy prices and inflation pressures linked to the US-Iran conflict.
- Economists expect a 25 basis point repo rate increase to 7%, but Cosatu warns this would harm workers already struggling with high costs of living and debt.
- Inflation rose from 3.1% in March to 4% in April, partly due to higher fuel prices, and could reach 5% in May, but remains within the Reserve Bank's target range.
- The local economy is growing slowly at about 1%, with most workers supporting large families and facing significant financial strain.
- Cosatu calls for continued fuel levy relief and urges the Reserve Bank to practice strategic patience by not raising interest rates until geopolitical conditions stabilize.
It added that inflation could increase further to about 5% in May.
Most workers are drowning in debt and borrowing simply to buy food, electricity, and transport, while also servicing unaffordable debt levels," Parks said.
"On average, those fortunate enough to have jobs support seven relatives.
“
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He said the economy has been stuck at a low growth rate of 1% and warned that higher interest rates would worsen the situation.
He said inflation, at 4%, is still within the reserve bank’s target range and had been steadily falling before the war in the
He added that once the war ends and global oil and gas supplies return to normal, local fuel prices and inflation should drop.
Parks emphasised that it is important for Treasury to continue fuel levy relief for as long as the war lasts and until fuel prices return to pre-war levels.
“It must exercise strategic patience, more so as peace negotiations to end the war take place.
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