The IPCA, Brazil's official inflation index, fell 0.32% in August, recording the highest monthly deflation in four years, since August 2022. The result exceeded market expectations, which forecast a decline of 0.28%. IBGE reported that the decline was mainly driven by a one-time discount on electricity bills and a 0.34% drop in the food and beverages group, which accumulated three consecutive months of decline.
The data reinforced conditions for the Central Bank to promote another 0.25 percentage point cut in the basic interest rate (Selic), currently at 14% per year, at next week's meeting of the Monetary Policy Committee (Copom). The absence of new inflationary pressures in the analyzed period created a favorable environment for the continuity of the monetary easing cycle.
Economists interviewed by the report warn, however, that the horizon ahead is not without challenges. Among the main risks on the radar, the effects of the climate phenomenon El Niño stand out, characterized by abnormal warming of the Pacific Ocean waters, which can impact agricultural production and, consequently, food prices in the country.
