Fri Oct 21 02:36:55 SAST 2016


By Kea Modimoeng | May 28, 2009 | COMMENTS [ 0 ]

THE cost of living for ordinary South Africans is soaring but a lack of economic growth might not see the drastic cuts in interest rates needed to help long-suffering consumers, economists said yesterday.

This followed the release by Stats SA of the consumer price index data used by the South African Reserve Bank for its inflation target, which revealed an increase of 8,4percent last month when compared with the previous year's figure.

Standard Bank economist Danelee van Dyk said despite the "surprising" GDP figures released on Tuesday, the bank still estimated that the monetary policy committee, which is currently meeting, will drop interest rates by 50 basis points.

"Consumer inflation remains worrisome and it also reflects some pressure on businesses as they can't cut prices," van Dyk said.

She said the level of wage demands that are put up by unions puts pressure on firms.

"Firms can't absorb that pressure because most of them are experiencing low profit levels."

T-Sec economist Mike Schussler said the Reserve Bank might cut interest rates by 100 basis points today.

"We have a problem with inflation and though there might be a rate cut this month, we might not be able to cut rates further in future."

He said the figures released this week show that "the economy is under enormous pressure".

Efficient Group economist Doret Els said the Reserve Bank finds itself in a difficult position in which there is low economic growth and interest rates are still high.

"It will be difficult to reduce rates heavily because of the lack of economic growth," Els said.

Based on the inflation figures, Els expects a 100 basis points cut today.

"Thereafter we might see a 50 basis points cut."

Yesterday, hundreds of National Union of Metalworkers members gathered in Pretoria and marched to the Reserve Bank in protest against high interest rates.

The union attributed the loss of about 30000 jobs in the metal industry to high interest rates.


Login OR Join up TO COMMENT