COSATU+strongly+condemns+MPC+interest+rate+increase



=The MPC increase in the interest rate=


 * August 3, 2006**

COSATU strongly condemns the decision of the Monetary Policy Committee to increase the interest rate by half a percentage point.

The current inflation rate remains well within the target range set by the government. In these circumstances, we do not see any reason for the increase in the interest rate, given the likely impact of slower growth and employment creation.

COSATU has consistently argued that the inflation target must not be prioritised over national developmental objectives. Unemployment is at 40% and monthly expenditure by half of all households is less than the indigency level of R800 a month. For this reason, ASGI-SA sets a target of halving unemployment and poverty by 2014.

We expected the MPC statement to at least evaluate the likely impact of higher interest rates on achieving the ASGI-SA targets, rather than acting as if the inflation target is the sole national goal. The MPC's decision once again demonstrates the problems with adopting an inflation target.

It seems the Reserve Bank is happy to choke off broader developmental strategies and long-term growth as long as it can keep inflation below 5% - even though that is far stricter than the national policy. Meanwhile, a continued rise in interest rates will cause hardship to working people both by increasing the cost of living and by slowing job creation.

In these circumstances, we again call on government to end the inflation targeting regime. If it does not do that, as a minimum it should ensure that equal weight is given to the targets of halving poverty and unemployment. Moreover, the Reserve Bank should be required to target the entire band, not just the lower limit.

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