FEDUSA Warns Monetary Policy Committee (MPC) to be cautious with Interest Rate Hikes

19 May 2022

The Federation of Unions of South Africa ( FEDUSA ) has noted with concern predictions by analysts and economists that the Monetary Policy Committee (MPC) may increase the repo rate with 50 basis points. The anticipated increase will be the largest increase than at previous meetings, after necessary expansionary fiscal policy interventions were announced during the height of the pandemic to stimulate the economy and equally restrain the COVID – 19 hardships for both workers, business and households.

The MPC is expected to make the announcement on Thursday, 19 May 2022. FEDUSA wishes to caution the Reserve Bank not to be reckless with yet another, and even bigger interest rate hike. Such a decision will further cause severe economic hardships to workers and consumers in general, who are already hamstrung by income insecurity and reduced wages as a direct consequence of the pandemic.

A 50 basis points (bps) hike will unleash hardship on workers in both the private and public sectors as many of them are still recovering from the shocks of the COVID-19 pandemic including wage freezes implemented by government due to its austerity measure implementation.

Disposable income for many households will once again be eroded as the knock-on effects of higher interest rates will make it exceedingly difficult for workers to service their debts such as home loan repayments, vehicle instalments and school fees, etc.

FEDUSA is also extremely concerned  about the impact of further interest rate hikes on the sustainability of jobs and survival of Small Medium and Micro Enterprises ( SMME’s). According to a report released by the First National Bank (FNB) middle class South Africans are spending most of their salaries within five days of getting paid. The Federation implores on the MPC to apply collective wisdom in its decision – making, as the three – month high of 5.9% inflation rate has been predominantly influenced by costs of transportation (14.7%) and primarily electricity and other fuels (14.1%) amongst other driving factors. Urgent Government intervention on these factors is crucial – FEDUSA’s calls for Ministers Godongwana and Mantashe respectively to fully consult social partners at NEDLAC and find a lasting solution to fix the unacceptably high fuel prices, and review of the general fuel levy,

is therefore totally justified, considering the consequent inflationary pressures and the burden to workers.

(368 Words)


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