Brazil's official inflation index, the IPCA, fell 0.32% in August, the national statistics agency IBGE reported on Friday (11). It was the first monthly decline in a year, since August 2025 (-0.11%), and the largest since August 2022 (-0.36%). In practical terms, a basket of bills and groceries that cost 500 reais (about $98) in July came in at roughly 498 reais in August.
The main driver was household electricity, which got 7.63% cheaper as the Itaipu bonus was credited on bills issued during the month. The power bill alone cut 0.33 percentage point from the index. Without it, the IPCA would have risen 0.01%, according to Fernando Gonçalves, who manages the survey at IBGE.
The housing group fell 1.87%, its steepest drop in more than 30 years; in July, the index had still risen 0.07%. "This result for the housing group is the lowest for an August since the Real Plan," IBGE researcher José Fernando Pereira Gonçalves told news site g1, referring to the 1994 stabilization plan.
Explainer: deflation is a broad decline in prices, the opposite of inflation. The Itaipu bonus returns to consumers part of the surplus from electricity sales at the plant Brazil shares with Paraguay; it appears on bills once a year and, according to Folha, is expected to fade from bills as soon as September. The yellow tariff flag, a surcharge mechanism, also remained in force, adding 1.885 reais to the bill for every 100 kWh consumed.
What else got cheaper
Airfares fell 13.17% and app-based rides got 4.57% cheaper. At the pump, ethanol dropped 3.95%, diesel 0.80% and gasoline 0.59%. Groceries eaten at home fell 0.61%, led by potatoes, down 19.89%: a kilo that cost 5 reais in July went for about 4 reais in August.
Not everything fell. Personal expenses rose 1.30%, piped gas 1.74% and household goods 0.64%. The food and drinks group ended the month down 0.34%, and transport down 0.86%.
The 12-month picture
Over 12 months, inflation eased to 4.22%, from 4.44% through July: prices are still rising for people on wages, just more slowly. Year to date, the IPCA is up 3.11%. For the second month in a row, the index stayed below the 4.5% ceiling of the Central Bank's target, set at 3% with a tolerance of 1.5 point in either direction.
The drop was stronger than financial markets had expected; analysts forecast a 0.28% decline, according to Bloomberg. After the release, the dollar opened 0.29% lower against the real, at 5.086 reais, at 9:54 a.m., Folha reported. The paper says the bonus effect should vanish from power bills as early as September.