Brazil’s annual inflation rate eased to 4.24% in early August, bringing it within the central bank’s target range for the first time since mid-2023. Consumer prices fell 0.4% from the prior month, exceeding the 0.32% decline forecast by economists and reversing the prior month’s 0.35% increase.
The reading undershot the median estimate of 4.33% and marked a notable retreat from the 4.64% pace recorded in mid-July. The central bank targets an inflation rate of 3% with a tolerance band of plus or minus 1.5 percentage points, meaning the latest figure remains within the acceptable range.
The inflation slowdown follows the central bank’s decision to reduce the benchmark Selic rate by a quarter point to 14% earlier this month, the fourth consecutive cut in the policy cycle. The monetary policy committee is scheduled to convene next on September 15–16, with another vote set for October.
The disinflation trend comes as Latin America’s largest economy grapples with elevated borrowing costs amid slowing growth. Domestic price pressures, compounded by higher energy costs linked to Middle East tensions, had pushed inflation above the target band in recent months. The government’s increased social spending ahead of October’s presidential election has sustained demand while raising investor concerns over fiscal sustainability.
President Luiz Inácio Lula da Silva and right-wing Senator Flávio Bolsonaro, the leading challenger in the election, have both criticized the central bank’s restrictive policy stance. Lula has urged faster Selic rate reductions, while Bolsonaro has framed high borrowing costs as a symptom of excessive government expenditure.
