UASA welcomes the decision of the South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) to leave the repo rate unchanged at 6.75%, as was widely expected.
This is welcome news for workers, as the actions of the SARB and the unemployment rate are closely interlinked. Unemployment and weak economic growth are often a direct result of decisions taken by the MPC. To increase interest rates amidst weak economic growth is senseless, as it does further damage with workers ending up with even less disposable income, having to pay more for goods in shops, for their homes and other expenses.
Higher interest rates do not lower inflation and do not assist the economy in terms of growth. However, economic growth is one of the factors that international grading agencies rate highly.
Fitch and Standard & Poor’s have already given SA’s sovereign rating junk status, but Moody’s Investors Service could be forced to follow suit later in the year, triggering capital outflows that would weaken the rand, ignite inflation, and push the government’s debt service costs even higher.
A higher interest rate would have been of no advantage to South Africa, its economy, and its already overburdened workers.
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