Brazil’s inflation cools as prices post first monthly decline in a year

Brazil's annual inflation rate slowed more than anticipated in the 12 months leading up to mid-August, as consumer prices experienced their first monthly decline in a year, according to official data released on Wednesday. Statistics agency IBGE reported that the IPCA-15 consumer price index increased by 4.24% over the year, down from 4.52% in the previous month and below most economists' forecasts.

On a monthly basis, prices fell by 0.40%, marking the first decline since August 2025 and also below the median forecast of 0.30% in a Reuters poll of economists.

Despite the easing inflation, annual inflation remains within the central bank's target range of 3%, plus or minus 1.5 percentage points. The central bank recently cut its benchmark interest rate by 25 basis points to 14%, making it the fourth consecutive rate reduction. This move was taken as inflation moderates and economic activity cools. The central bank is expected to discuss its next policy decision at a meeting on September 15-16.

The decline in the IPCA-15 index was primarily attributed to lower housing, transportation, and food prices. Housing costs dropped by 1.41%, mainly due to a one-off discount on electricity bills resulting from the operation of the Itaipu hydroelectric dam. Transportation prices fell by 1%, driven by cheaper air fares and fuel costs. Additionally, food and beverage costs decreased by 0.57%.