Brazil: Inflation jumps to over one-year high in February
Latest reading: Inflation overshot the upper bound of the Central Bank of Brazil’s 1.5–4.5% tolerance band for the fifth month running in February, rising to 5.1% in February from January’s 4.6%. February’s result was the highest inflation rate since September 2023. Looking at the details of the release, the acceleration was chiefly due to housing and utilities prices rising in February after dropping in the previous month. Conversely, price growth for food and transport eased.
Meanwhile, the trend was unchanged, with annual average inflation coming in at January’s 4.4% in February. Meanwhile, core inflation rose to 4.5% in February from January’s 3.7%.
Finally, consumer prices rose 1.31% over the previous month in February, picking up from the 0.16% rise recorded in January. February’s result marked the highest reading in nearly three years.
Outlook: Our Consensus is for average inflation to rise further and peak in Q2, and to then inch down in Q3–Q4; it will take time for past interest rate increases—the current tightening cycle began in September 2024 and amounts to 275 basis points of hikes so far—to trickle down to the economy and restrain domestic demand.
Overall in 2025, our panelists see inflation surpassing both 2024’s level and the Central Bank’s tolerance band. Despite having a wider positive interest rate differential versus the U.S., Brazil’s currency is set to average at a weaker exchange rate in 2025 than in 2024, spurring inflation. Upside risks include extreme weather impacting electricity and food prices.