The South African Federation of Trade Unions (SAFTU) is pleased that the inflation rate has sunk back to the target range. The inflation target range the South African Reserve Bank (SARB) has set for itself is 3 – 6%. That consumer prices have eased to 5,4% in June, means that we are well within the SARB’s inflation targeting range.

The unleashing of successive interest rate hikes by the SARB is premised on price stabilization, which essentially means keeping the inflation rate within the target band of 3 – 6%. Now that inflation rate is restored to the target band, SAFTU does not expect the SARB to hike interest rates tomorrow (20 July) when they announce their policy rate adjustment, because even in their own tools of analysis, inflation is restored to a ‘healthy’ band.

Even when the inflation rate had risen beyond the inflation target range, SAFTU never approved the use of interest rates to fight inflation. Interest rate hikes are inhumane, with dire consequences for the living standards of ordinary workers, creating unemployment, pushing small business traders out of business, and dampening the productive sectors of the economy as a whole.

Our argument has always been that interest rates transfer wealth from the working class to the rich. To fight inflation, we have proposed as an alternative, for the government to power the under-utilised manufacturing capacity that is lying fallow, and to even expand it. Given the high level of unemployment, this also means there is plenty of unutilised human resource that, combined with machinery that is lying fallow, can produce more goods and services to push down consumer prices.

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