Durban - SACP general secretary Solly Mapaila has raised concerns about the South African Reserve Bank (SARB) monetary policy committee’s decision to increase the repo rate in response to rising inflation levels.
Last week, the repo rate increased by 50 basis points to 7.75%, making it the ninth consecutive increase since November 2021.
“While the significance of price stability as derived from the SARB’s mandate is in no dispute, it is equally important to note that the mandate also dictates that price stability should be maintained ‘in the interest of balanced and sustainable economic growth’.
“Therefore, this decision, which comes on the back of economic growth decline in the fourth quarter of 2022, as reported by Stats SA, and rising unemployment, can hardly be considered balanced nor sustainable and in no uncertain terms underscore the SARB’s narrow focus on inflation in total disregard of the need to consider economic growth and employment in its monetary policy decisions.”
Mapaila said the party viewed this as a “punitive decision against the working class and poor particularly”, saying the decision to increase the interest rate was unlikely to resolve rising inflation in the country.
“The underlying cause of inflation is not demand-driven and is even induced by conditions beyond our control like the imperialist aggression against Russia through their proxy war in Ukraine. By the SARB’s own admission, the current inflation in SA is of a supply-side nature, that is, so-called cost-push inflation.”
Mapaila said since the Reserve Bank hiking cycle started, the repo rate increased nine times by 425 basis points in total, but inflation remained around the 7% level
“This may indicate the ineffectiveness of monetary policy to deal with the supply side or cost-push inflation.”