The February 2025 inflation report released by the Brazilian Institute of Geography and Statistics (IBGE) revealed significant shifts, showing the Índice Nacional de Preços ao Consumidor Amplo 15 (IPCA-15) rising by 1.23%. This marks a marked increase of 1.12 percentage points from January's minimal rise of 0.11%. Notably, this monthly inflation surge is the largest since April 2022 and the highest recorded for February since 2016, when it was 1.42%.
Market analysts had projected even higher figures, expecting a rise around 1.34%. The main culprits fueling the inflation this month were the housing sector, which soared by 4.34% and contributed 0.63 percentage points to the overall index, and education costs, which climbed 4.78%, resulting in 0.29 percentage points.
Energy costs played a pivotal role, with residential electricity prices leaping 16.33% after experiencing steep declines of 15.46% the previous month, largely due to backtracked tariffs relating to the Itaipu power plant. Meanwhile, the water and sewage tariffs also increased, reflecting hikes of 6.42% in Belo Horizonte and 6.45% across various services providers in Porto Alegre, effective from January 1.
Although housing and education costs rose significantly, food categories showed signs of deceleration. The food and drink group recorded increases of 0.61%, contributing 0.14 percentage points to the inflation figure. While the cost of household food climbed by 0.63%—lower than January's sharp rise of 1.10%—individual items across the board experienced mixed price changes. Carrots and ground coffee saw significant spikes of 17.62% and 11.63%, respectively, but staple items like potatoes, rice, and fruits dropped significantly, at rates of -8.17%, -1.49%, and -1.18%.
Looking at the broader labor market, the IBGE noted declines only for clothing and communications, which reported minor decreases of -0.08% and -0.06%. The transportation sector also saw minor increases, totaling 0.44%. Here, fuel prices rose by 1.88%, and public transportation costs were affected by new regulations and tax increases on goods determined by the ICMS. Notably, airfares dropped sharply by 20.42%.
Regional trends tell varied stories as well. Recife reported the highest inflation at 1.49%, aided by substantial increases in electricity and gasoline prices, where electricity surged by 14.78%. On the flip side, Goiânia recorded the lowest inflation rate at 0.99%, helped by key declines including -26.67% for air travel and -2.67% for rice.
The upcoming inflation trends may result from these shifting dynamics, particularly how consumers respond to energy and education costs moving forward. The IPCA-15 now shows an annual increase of 4.96%, up from the previous year's 4.50%. This increase remains over the Central Bank's inflation target, which is strategically set at 3%, with tolerances between 1.5% and 4.5%.
Due to these rising pressures reflected in February's report, the expectations of monetary policy analysts have turned cautious. Economists anticipate the Copom's next steps will likely include raising the Selic rate by 1 percentage point to 14.25% during their next meeting. This decision will reflect inflationary conditions fueled by increased energy prices and rising educational rates.
The February IPCA-15 highlights the complex and multifaceted nature of Brazil's inflationary climate, raising key questions about consumer spending capabilities, regional disparities, and the future of economic policymaking.