Brazilian inflation jumps to highest since 2003 in February

The cost of living in Brazil jumped to its highest since 2003 in February on the back of large increases in education and food costs.

Brazilian consumer prices as measured by the IPCA-15 index rose by 1.42% month-on-month, pushing the year-on-year rate of price increases to 10.84%, according to the country´s statistics office.

That was more than the 1.32% advance which economists at Barclays had penciled in.

Education and food costs increased by the most, rising by 5.91% and 1.92%, respectively, versus the prior month.

However, the main drivers of the upside surprise came from an unexpected gain of 0.14% over the month in apparel prices (Barclays: -0.6%) and broad-based adjustments in beauty products, Barclays´s Bruno Rovai said in a research note e-mailed to clients.

Tuesday´s CPI print would be enough to keep a minority on the central bank´s policy committee, Copom, voting for an increase in interest rates at the following week´s meeting, Rovai said.

Yet as inflation started to decrease in year-over-year terms, alongside data pointing to a string deterioration in the labour market, the Copom would begin easing monetary policy by August, Barclays said.

Other data also published on Tuesday revealed that the unadjusted current account deficit in South America´s largest economy worsened from -$2.4bn in December to -$4.8bn in January.

Even so, that was better than the -$6.0bn economists had penciled in and the -$12.2bn of red ink seen in the same month of 2015.

However, it came at a steep price, as the recession-wracked nation saw imports collapse by 39% year-on-year, which more than offset an 18% drop in exports.

On a rolling 12-month basis, the current account deficit slipped from 3.2% of gross domestic product in December to 2.9%.

"Moreover, tightening credit conditions, the collapse of private investment and the rapidly weakening labour market mean that imports will remain under pressure this year," Andres Abadia, senior international economist at Pantheon Macroeconomics said.

.

A weaker currency was also expected to boost exports.

Net foreign direct investment held up however and was more or less unchanged from a year ago.

As of 14:43GMT the US dollar was 0.68% higher against the Brazilian real, at 3.9728.