Consumer prices rose by 1.14% mom in February, well above the Bloomberg market consensus of 1.01% and our 0.98% call. The main positive contributors in the month were housing and utilities (+1.16% mom; +36bps), education (+5.57%; +22bps) and transport (+1.57% mom; +21bps). Food (+0.6% mom; ;+11pb) and urban transport(+3.45% mom; 16pb) prices explained most of the surprise relative to our forecast. Consumer prices excluding food increased 1.26% mom (+1.22% one year earlier), while inflation excluding food and energy rose by 1.18% mom. Overall, annual headline inflation increased by 6bps from January to 5.28%, while core inflation dropped by 8bps to 5.63% (10.60% peak in April last year; 8.8% at the end of 2023).
Energy CPI rebounded, while services inflation remained elevated. Non-durable goods inflation (mainly food) came in at 3.98% yoy, increasing 27bps from the previous month. Meanwhile, energy inflation rose to 4.13% yoy, a rise of 113bps from January, due to gas price adjustments. Durable goods inflation remained in negative territory at -2.68%, but increased 14bps from January. Services inflation dropped by 12bps to a still high 7.22% (9.51% peak in September). At the margin, we estimate that inflation accumulated in the quarter was 5.4% (SA, annualized; 4.6% in 4Q24). Core inflation fell to 5.0% from 5.5% in 4Q24 (SA annualized).
Our take: Inflation has surprised to the upside for three consecutive months, leading the annual print to remain sticky at a high level. Our preliminary estimate for March’s CPI, to be released on April 7, is between 0.5% and 0.6%, resulting in annual inflation falling to 5.14% (-14bps). Our YE25 CPI call is at 4.5% yoy. The progress of the disinflationary process will be contained by higher indexation pressures and possible additional increases in gas prices. Therefore, we expect the Central Bank to remain cautious in its cutting cycle. While we expect the Board to resume cuts with a 25 bps adjustment to 9.25% at the next MP to take place on March 31, we cannot rule out another pause.
