cosatu calls for another cut in rate

COSATU general-secretary Zwelinzima Vavi has again demanded a 2percent cut in the interest rate following the release of the inflation rate for June which stood at 6,9percent.

Yesterday, Statistics SA released the consumer price index annual inflation rate which showed a decline, from 8percent in the previous month. In August last year inflation peaked at 13,6percent.

The Reserve Bank has already cut the repo rate by 400 basis points this year to its current level of 7,5percent.

But despite this, Vavi has called on the Reserve Bank's monetary policy committee (MPC) to convene urgently and consider dropping interest rates by a further 200 basis points.

Vavi said the bank's traditional policy of inflation targeting was a "punishing" one that mainly affected the poor.

The labour federation's stance will again see it go head-to-head with outgoing governor Tito Mboweni.

Vavi said it was insignificant that the decline in the inflation rate may be viewed as good news.

He said: "To get to this point, where inflation is going down, 179000 jobs have been lost between January and March. Between March and June a further 308000 jobs were lost."

Economists, meanwhile, remain doubtful that the bank will make further interest rate cuts at the next scheduled MPC meeting next month.

However, they say Vavi's comments cannot be taken lightly as the union was playing a leading role in the country's monetary policy debate which were also in line with the pro-poor policies adopted by the ANC at its Polokwane conference in 2007.

When President Jacob Zuma announced two weeks ago that Mboweni would be replaced by Gill Marcus, it sparked speculation that he had caved in to pressure from the tripartite alliance, particularly Cosatu, who wanted a more "engaging" person at the helm.

The Competition Commission has also been under pressure from the unions to probe price-fixing claims against retailers, with food inflation reaching a high of 17,8 percent in August last year.

According to yesterday's figures by Statistics SA, food and non-alcoholic beverages prices decreased by 0,3percent between May and June this year.

The annual food inflation rate decreased from 12,3percent in May to 10,2percent in June.