Brazil: Inflation slides in August
Latest reading: Inflation came in at 4.2% in August, down from July’s 4.5%; the moderation was roughly in line with market analysts’ expectations. Looking at the details of the release, the decline was driven by moderating price pressures for transportation—despite Petrobas’ 7.0% gasoline price hike in July—and housing. Moreover, prices for clothing also grew at a more subdued pace.
Meanwhile, the trend was unchanged, with annual average inflation coming in at July’s 4.4% in August. Meanwhile, core inflation fell to 3.8% in August from July’s 4.2%.
Lastly, consumer prices fell a seasonally adjusted 0.02% in August over the previous month, swinging from the 0.38% increase seen in July. August’s result marked the weakest reading since June 2023.
Outlook: Our Consensus is for inflation to remain close to current levels in September–December, before declining again in Q1–Q4 2025.
Overall in 2025, price growth will be contained by a high base of comparison plus the hit to private spending growth from past and current interest rate increases. That said, inflation is seen remaining above the midpoint of the Central Bank of Brazil’s 1.5–4.5% tolerance band throughout our forecast horizon, which ends in 2028. Extreme weather events and a weaker-than-projected real pose upside risks.