SACP denounces the highest interest rate hike in two decades
22 July 2022
The South African Communist Party (SACP) denounces the decision by the South African Reserve Bank’s five-member Monetary Policy Committee to increase the country’s already high interest rate compared to many countries. On Thursday, 21 July 2022 the Reserve Bank increased the repurchase rate by 75 basis point. This raised the repurchase rate from 4,75 per cent to 5,5 per cent, compared to Australia (1,35 per cent), Britain (1,25 per cent), Denmark (–0,45), Japan (–0,1 per cent), the United States (1,75 per cent), Norway (1,25 per cent) and many other countries. The highest repurchase rate hike by the Reserve Bank in 20 years, since 2002 when the repo rate was hiked by 100 basis points, brings the prime rate to 9 per cent.
It is said the sky-rocketing interest rate hike in 20 years underlines the Reserve Bank’s determination “to tame rampant inflation and also signalling an acceleration in the pace of interest rate hikes” (Business Day, 21 July 2022: “Reserve Bank signals sharper rate hikes ahead as it confronts inflation”). This anti-people conservative monetary policy direction will negatively affect the national imperative to achieve inclusive economic growth by raising the cost of borrowing and capital.
With COVID-19 restrictions relaxed across the world, some social protection programmes that were adopted at the height of the pandemic have been withdrawn in many situations across the world. In our country, those affected include the millions who the South African Social Security Agency did not pay the Social Relief of Distress Grant after April 2022 following changes to the eligibility regulations for the grant or as a result of a failure to pay the grant. This negatively impacts local demand. At this moment, South Africa should move decisively towards a comprehensive social security, including a universal basic income grant.
Interest rate hikes that further suppress local demand as if it had not been affected already by a wide range of factors like the aftermath of the COVID-19 pandemic in the current reality amount to firing blanks at inflation.