Brazil’s IPCA-15 consumer price index is projected to decline 0.31% in August, a sharp reversal from July’s 0.97% rise, as a temporary electricity discount from the Itaipu hydroelectric plant offsets broader price pressures.
The median estimate from Reuters’ survey aligns with the projection, forecasting a 0.30% contraction. Over the 12 months through August, the index is expected to ease to 4.34% from 4.52% in July, according to ASA and Banco Daycoval.
The residential electricity component is seen falling 6.51% in August, contributing roughly 0.27 percentage points to the headline deflation. The housing group, which includes electricity, declined 1.57% after rising 0.97% in July. Regulated prices overall posted a 1.11% drop, compared with a 0.37% increase in the prior month.
Airline ticket prices fell 6.00% after surging 11.70% in July, while gasoline prices declined 0.80%. Food prices remained in deflation at 0.39%, a moderation from July’s 0.66% decrease, as declines in fresh food items eased.
Services inflation slowed to 0.14% from 0.39% in July, though underlying services rose 0.32%, with the 12-month core rate cooling to 4.84%. Labor-intensive items increased 0.47%, while the average of core measures was projected at 0.21% for the month and 4.23% over 12 months.
Manufactured goods are expected to rise 0.16%, with upward pressure from hygiene and cleaning products offset by declines in ethanol, automobiles and apparel. The Itaipu bonus, a temporary discount, is cited as the primary driver of the August deflation, according to ASA. The effect is expected to reverse in September.
Banco Daycoval maintained its end-2026 inflation forecast at 5.0%, above the central bank’s 4.5% target ceiling, citing risks from a potentially strong El Niño in the second half of the year. Analysts noted that while the August reading is largely benign, persistent service inflation warrants continued monitoring by policymakers.
