Brazil's official inflation preview recorded deflation of 0.40% in August, the first negative reading since August 2025 (-0.14%), pulled down by cheaper electricity bills. The IPCA-15, released on Wednesday (26) by the national statistics agency IBGE, was the lowest result since August 2022, when it marked -0.73%. In July the index had risen 0.06%, and it now accumulates a 4.24% increase over 12 months.
Residential electricity was the heaviest item behind the drop: it fell 6.25% and alone shaved 0.26 percentage point off the index. The move came from the Bônus de Itaipu, a discount credited to consumers' August power bills and linked to the binational Itaipu hydroelectric dam on the Paraná River, on the border with Paraguay. According to CNN Brasil, the credit applies only to this month and will not be repeated in September.
The price survey ran from July 16 to August 14 across 11 locations, from the metro area of Belém, at the mouth of the Amazon, to Porto Alegre in the far south, including Rio de Janeiro, São Paulo, Salvador, Recife, Fortaleza, Belo Horizonte, Curitiba, Brasília and Goiânia. Five of the nine groups surveyed showed deflation: housing (-1.41%), transport (-1.00%), food and beverages (-0.57%), clothing (-0.20%) and communication (-0.02%). Airfares fell 13.30% and fuels 1.43%, with ethanol down 3.63%, gasoline 1.23% and diesel 0.71%. Food consumed at home became 0.97% cheaper, led by tomatoes (-27.38%), potatoes (-25.14%), carrots (-17.05%) and ground coffee (-2.31%).
On the other side, personal expenses (0.66%), education (0.46%) and health (0.40%) kept rising. The 12-month inflation rate fell from 4.52% to 4.24%, back below the 4.5% ceiling of Brazil's inflation target, though still far from the 3% midpoint. The result came in below market expectations of a 0.30% monthly drop and 4.34% over 12 months, according to InfoMoney.
Temporary relief and climate risk
Analysts interviewed by CNN Brasil describe the relief as temporary. Part of it came from one-off factors such as the power bill bonus, or volatile ones such as airfares, and core inflation gauges showed no relevant improvement. Juliana Inhasz, an economist and professor at the Insper business school, says the result makes the central bank's Monetary Policy Committee (Copom) more comfortable cutting the Selic benchmark rate by 0.25 percentage point in September:
"A 0.25-point cut in September looks more likely and the situation becomes more comfortable. But anything beyond that cannot be justified by today's indicator."
The inflation strategy team at Warren Investimentos, formed by Andréa Angelo, Laís Camargo and Júlia Freitas, was even more cautious. According to the economists, core and underlying services measures came in more pressured in some components, and an intense El Niño could add about 0.40 percentage point to the 2026 IPCA and another 0.20 point in the first quarter of 2027. Annualized inflation in labor-intensive services remains above 7%, according to the firm. For Inhasz, disinflation will only be considered structural once services cool down, core measures fall and price increases become less widespread.
The full August IPCA, which covers 16 locations, will be released on September 11. The central bank's Focus survey, published on Monday (24), shows the market expects deflation of 0.18% in the full monthly index.