Brazil's February IPCA-15 inflation accelerated 1.42% m/m and 10.8% y/y, surprising on the upside. The unexpected gains in apparel prices and broad-based price adjustments in beauty products mainly led to the surprising print. Meanwhile, food and beverage inflation was slightly lower than expected.

Regulated prices rose 1.37% m/m, lower than half of the print from February 2015, bringing down the year-on-year rate to 16.4% from the December's peak of 18.1%. Meanwhile, market prices rose to 9.14%, as compared with 8.50% by the end of 2015. Services prices rose 1.26% from 0.56%, suggesting an adjustment of 7.41% m/m in tuitions. However, the average of BCB tracked three core measures reached 0.83% m/m sa, as compared with 0.63% in January.

The stronger-than-expected inflation data is expected to mostly keep the minority of the Copom board members voting for a rise in interest rate next week. In spite of this, the majority of the board is likely to vote for keeping the rates unchanged, on par with speeches of many members.

"We believe that as soon as inflation starts to decrease in y/y terms, and as income activity data support our view of a strong deterioration in the labor market, the Copom will start easing monetary policy by August", says Barclays.