Preliminary inflation figures show a 1,33% increase in February.

From Reuters - Driven by electricity, bus fares, and fuel costs, Brazil's preliminary official inflation rate accelerated to 1,33 percent in February, the highest level in 12 years, leaving the Central Bank even more cornered between high price levels and the prospect of economic contraction.

The January increase in the National Consumer Price Index-15 (IPCA-15), after rising 0,89 percent in January, was the largest since February 2003, when the indicator rose 2,19 percent.

With this result, the IPCA-15 accumulated an increase of 7,36 percent in the 12 months to February, the Brazilian Institute of Geography and Statistics (IBGE) reported on Tuesday, compared to 6,69 percent in January.

Over the past 12 months, this is the highest level since June 2005 (7,72 percent), far exceeding the government's target ceiling of 4,5 percent, with a margin of 2 percentage points.

The results were slightly above the median expectation in a Reuters poll, which predicted a 1,29 percent increase month-on-month and a 7,34 percent increase over 12 months.

According to IBGE, the price of electricity had the greatest individual impact in the month, contributing 0,23 percentage points, after rising 7,70 percent. This led the Housing group to accelerate its increase to 2,17 percent in February, compared to 1,23 percent in the previous month.

Energy prices had already risen earlier in the year after the government adopted the tariff flag system, which passes on the higher generation costs to consumers due to lack of rain.

But the group with the greatest impact on the IPCA-15 for the month was Transportation, contributing 0,37 percentage points to the 1,98 percent increase, compared to 0,75 percent in January.

According to IBGE, the result mainly reflects adjustments in urban bus fares, which rose 7,34 percent. It also reflects the 2,96 percent increase in the price per liter of gasoline and the 2,54 percent increase in the price per liter of diesel following the increase in PIS/COFINS tax rates that came into effect on February 1st.

Administered prices tend to be the biggest culprit for inflation this year, mainly due to adjustments in transportation, electricity, and fuel costs.

The group that recorded the highest increase in February, however, was Education, at 5,98 percent, due to the adjustments seen at the beginning of the school year, highlighted IBGE.

The Central Bank, which has been promising efforts to bring inflation back to the center of its target trajectory in 2016, has already raised its estimate for the increase in administered prices in 2015 to 9,3 percent, but economists consulted in the Central Bank's own Focus survey are already estimating a 10,4 percent increase in these costs.

In a monetary tightening process initiated last October, the Central Bank has already raised the Selic rate to 12,25 percent per year. Given the scenario of pressured inflation with no signs of slowing down, economic agents foresee a 0,5 percentage point increase in the Selic rate at the next meeting of the Monetary Policy Committee (Copom), in early March.

For the IPCA (Brazilian consumer price index) at the end of this year, economists consulted in the Focus survey estimate an increase of 7,33 percent. Regarding the economy as a whole, the outlook is for a contraction of 0,50 percent.