Brazil: Inflation decelerates in August
Latest reading: Consumer prices rose 5.1% on a year-on-year basis in August, down from a 5.2% increase in the prior month. Inflation decelerated for the second consecutive month in August, and was the join-lowest print since January. The reading was largely in line with market expectations, but continued to overshoot the Central Bank’s 1.5–4.5% tolerance range.
Relative to the previous month’s data, there were reduced price pressures for transportation (+3.3% in annual terms vs +3.6% in July) and housing (+5.0% vs +5.5% in July). In contrast, there were more notable price pressures for clothing (+4.5% vs +4.1% in July) and education (+6.2% vs +6.1% in July). Finally, the variation in food and beverages prices was the same as in the prior month (+7.4% in August and July).
Meanwhile, core consumer prices were up 5.4% on a year-on-year basis in August, stable from the prior month’s reading.
Lastly, consumer prices fell 0.11% in August on a month-on-month basis, following a 0.26% rise in the prior month.
Outlook: Our Consensus is for average inflation to come in roughly close to current levels in September and in October–December, before gradually trending down through Q4 2026.
Overall in 2025, inflation is set to hit a three-year high; price pressures will be fanned by a robust labor market and continued wage growth. Our Consensus is for 2026 inflation to wane to a six-year low and re-enter the Central Bank’s 1.5–4.5% tolerance band, as a high base effect, near two-decade high interest rates and notably milder wage growth dampen price growth. Upside risks include extreme weather hurting food and energy production. Changes in domestic fiscal policy ahead of next year’s elections are a factor to watch.