Brazil mid-February inflation exceeds economist forecasts
Brazil mid-February inflation rose 0.84 percent, exceeding forecasts. Analysts still expect the central bank to begin cutting interest rates next month.
Consumer prices in Brazil rose more than anticipated during the month to mid-February, according to official data released on Friday. Despite the overshoot, analysts suggest the figures are unlikely to prevent the central bank from initiating a monetary easing cycle next month. The IPCA-15 index climbed 0.84% in the period, marking the sharpest increase in a year and exceeding the 0.57% median estimate from a Reuters poll of economists.
On an annual basis, inflation reached 4.1%, a decrease from the 4.5% recorded the previous month but still above the 3.82% projected by market analysts. The central bank currently targets inflation at 3%, with a tolerance margin of 1.5 percentage points. Policymakers have signaled plans to begin lowering interest rates in March after maintaining them at a near two-decade high of 15% since mid-2025 to tame persistent inflation.
Statistics agency IBGE identified transportation and education as the primary drivers of the monthly increase, citing a jump in airfare prices and annual tuition adjustments. Despite the seasonal firmness, some economists believe the broader disinflationary trend remains intact. Andres Abadia, chief Latin America economist at Pantheon Macroeconomics, stated that the current data should allow for a 50-basis-point cut in March.
Kimberley Sperrfechter, an emerging markets economist at Capital Economics, indicated that future policy decisions will lean heavily on upcoming gross domestic product figures and full-month inflation data.
As things stand, we continue to expect a 50bp cut, but the risks to this view have grown.
While a 50-basis-point cut remains the baseline expectation for March, the upside surprise in February's data has introduced new variables for the central bank to consider as it prepares for its next policy meeting.
