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By Sinesipho Schrieber

Journalist


Reserve Bank ‘could have helped consumers’

An interest rate cut would have given consumers buying power to revive the economy through spending.


The South African Reserve Bank’s (Sarb) decision to keep the repo rate unchanged may be a safe option in the current economic climate, but some economists believe the central bank missed an opportunity to aid consumers.

Sarb governor Lesetja Kganyago announced yesterday the monetary policy committee decided to keep the interest rate at 6.5% due to the unstable local economy.

Economist Mervyn Abraham said the central bank missed an opportunity to cash in on the decrease in inflation rates and invest in economic growth. An interest rate cut would have given consumers buying power to revive the economy through spending.

“We are very disappointed at the bank’s conservative hand. The cut would have given millions of South Africans stuck in debt a relief. Consumers would spend more and stimulate the economy, given the fact lack of consumer spending has been contributing to the economic crisis,” said Abrahams.

He added small business enterprises aimed at boosting the economy according to President Cyril Ramaphosa were also let down, having less chance of taking off due to the unchanged rate.

Trade union federation Cosatu spokesperson Sizwe Pamla said the bank failed to provide relief for millions of people and businesses stuck in debt. He said a decrease in the interest rate would have given many room to breathe and afford to pay their debts.

“The economy is on its knees and a cut would have given it a breather. The cut would see a lot of businesses survive and employ more people as they would not be suppressed by high interest rates. Things will stay the same. We will continue to suffer from debts, unemployment and high cost of living,” Pamla said.

But economist Dawie Roodt welcomed the decision.

He said the committee made the right decision based on high inflation expectations guided by the state of the economy and October’s drop was not enough to convince them of a potential decrease.

“The bank was right. Looking at the economy, one would have predicted high inflation levels. August’s 4.3% inflation hike and moderately high inflation levels throughout the year influenced an even higher inflation rate expectation rate by the bank, which guides their decision.

“To protect the economy, keeping the rate unchanged was a good decision because the state of the economy failed to convince potential growth,” Roodt said.

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