The South African Reserve Bank (Sarb) should cut the repo rate by at least 100 basis points to stimulate the economy, the Federation of Unions of South Africa (Fedusa) said on Wednesday.
“We cannot afford to maintain interest rates at the current level if we are really serious about stimulating the economy and creating jobs,” Fedusa general secretary Dennis George said in a statement.
The bank’s Monetary Policy Committee (MPC) will announce its decision on the repo rate on Thursday afternoon following three days of deliberations.
The repo rate — or the price at which the Sarb lends cash to the banking system — has been unchanged at 5.5% since November 2010.
George reminded the MPC that Finance Minister Pravin Gordhan had last year asked the Sarb to be more flexible.
“He explicitly requested the committee to be more flexible in their approach and also include other issues when considering the repo rate,” George said.
The Sarb should broaden the scope of the MPC’s mandate, which was geared only at inflation targeting.
“Of course inflation targeting is important for the purpose of price stability; however, this one goal cannot be pursued relentlessly to the detriment of sustainable economic growth and job creation.
“Many of South Africa’s problems, including inflation, are structural in nature,” he said.
Fedusa’s call to cut the repo rate to increase consumer spending and stimulate economic growth and job creation was supported by the findings of the UN’s department of economic and social affairs’ world economic situation and prospects report 2012, said George. — Sapa