PRICE pressures on consumers remained high last month as health insurance and fuel costs weighed on household incomes that are still adjusting to higher borrowing costs after an interest rate hike in January.

Inflation that rises faster than expected on a sustained basis would normally encourage interest rate hikes, although Reserve Bank governor Gill Marcus said recently that hikes were likely to be moderate given concerns about weak economic growth.

Most economists said the Bank’s monetary policy committee (MPC) was unlikely to increase rates again at its meeting next week despite the worse-than-expected inflation data. This was because the MPC had already forecast inflation to increase in coming months and breach the upper end of the 3%-6% target band in the second quarter of the year, they said.

The consumer price index (CPI), which measures inflation, increased by a slightly-higher-than-expected 5.9% in February compared with a year earlier. This was from a 5.8% increase in January and against a BDlive median forecast of 5.8%.

The MPC would likely be interested in how much rand weakness was visible in the inflation data, said Nomura International emerging markets economist Peter Attard Montalto. He said “weak rand pass-through was still there but sluggish”, which would support the repo rate remaining unchanged at 5.5% by next Thursday.

The rand has firmed since the last MPC meeting in January, moving from an average of R10.91/$ to levels of about R10.72/$.

Stable core inflation — which is CPI that strips out food, fuel and energy costs — would also support unchanged interest rates, Mr Attard Montalto said. Core inflation remained unchanged at 5.3% for the sixth consecutive month.

The price pressures come as households are battling high debt levels and increasing administered costs such as electricity, petrol and transport. Petrol prices increased 39c/l while health insurance costs rose 8.3% last month.

Investec chief economist Annabel Bishop said further interest-rate hikes would be “problematic” for economic growth. She said the January rate hike had a direct, immediate effect on household finances, given that 59% of household debt comprised of mortgages.

Household spending is important for the economy as it accounts for 61% of total spending on gross domestic product. Investec forecasts a 50-basis-point hike in July.

Old Mutual Investment Group senior economist Johann Els said that limited rand pass-through, a more stable currency and a weak economy would help limit interest-rate increases.