Consumer prices in Brazil fell 0.40% in August, the biggest monthly deflation in four years, according to the newspaper Jornal do Comércio. The figure comes from the IPCA-15, the preview of the country's official inflation index compiled by statistics agency IBGE. In practice, a basket of goods that cost R$ 1,000 got about R$ 4 cheaper in a month.
The relief came mainly from electricity bills, gasoline and food, G1 reported. Residential power bills dropped 6.25%: for a family paying R$ 200 a month, that meant roughly R$ 12 in savings. That single discount accounted for 0.22 percentage points of the deflation, according to an analysis in Valor.
Understanding the discount
The discount is the so-called bônus de Itaipu, a rebate to consumers funded by surplus balances from the trading account of the Itaipu hydroelectric plant. The effect is temporary: without the bonus, September inflation is expected to pick up again, UOL points out. Even without the rebate, August would still have posted deflation, because food, the heaviest item in the index, fell 0.12%, according to Valor.
The concern is what comes next. The end of the power tariff discount and the arrival of a strong El Niño may limit the inflation relief, according to UOL. El Niño, a climate pattern that warms Pacific waters and shifts rainfall in Brazil, tends to make food, energy or both more expensive.
In a survey of 171 economists conducted before the central bank's latest rate meeting, the median response pointed to an impact of 0.4 percentage points on inflation this year and 0.3 points in 2027, Valor reports. The estimates use the 2015-2016 El Niño, of similar intensity, as a reference. The Focus bulletin, the central bank's weekly survey of market analysts, already projects inflation of 5.02% in 2026 and 4.25% next year.
If those projections hold, inflation would breach the official target ceiling this year and could do so again in 2027, Valor assesses. There are other pressure points: cheaper gasoline, which pushed the transport group down 1% in August, depends on subsidies that are set to end. Consultancy Oxford Economics sees that as the main reason inflation will stop decelerating this year.
Services inflation, which tracks wages and employment, remains the main barrier to lower prices: it rose 5.9% over 12 months through July, according to Valor. In August, the health and personal care and personal expenses groups posted the index's biggest increases.
For consumers, the picture is one of real but passing relief. Analysts expect one more cut to the Selic, Brazil's benchmark interest rate, to 13.75%. If food prices surge with El Niño, the central bank may have to halt the cutting cycle, according to Valor.