(Adds data, policy context)
By Brad Haynes
SAO PAULO, April 14 (Reuters) - Brazilian retail sales tumbled in February at the steepest annual rate since 2003 as rising inflation and interest rates dented consumer confidence, adding to signals of a sharp economic slowdown at the start of the year.
Sales volumes fell 3.1 percent from February 2014 , government statistics agency IBGE said on Tuesday, more than the median forecast of a 2.15 percent drop in a Reuters poll. It was the worst monthly drop from a year earlier since August 2003.
February sales slipped a seasonally adjusted 0.1 percent from January, below a median forecast for 0.3 percent growth.
Until recently, Brazilian retailers had proven less vulnerable than other sectors to the faltering economy. Just one year ago, sales grew at an annual pace of nearly 9 percent.
The latest retail data underscored expectations of an economic recession in Brazil this year as President Dilma Rousseff raises taxes and cuts spending to limit public debt and safeguard the country’s investment-grade rating.
A higher gas tax in February hurt sales at the pump, which fell 5.3 percent from January and plunged 10.4 percent from a year earlier.
Furniture and home appliance sales also tumbled 10.4 percent from a year earlier and declined 1.3 percent from January, as borrowing costs rose due to a series of interest rate hikes by the central bank.
Inflation in 12 months soared to nearly 8 percent in February and continued to climb in March, when the central bank raised its benchmark interest rate again, to 12.75 percent.
Brazil’s Carnival holiday celebrations fell in February this year and March in 2014, reducing ordinary work days in February 2015. (Reporting by Rodrigo Viga Gaier and Pedro Fonseca Editing by W Simon)