巴西7月通胀回落至目标区间，核心服务涨价暗示改善或近尾声

Luis Otávio Leal Ana Paula Paiva/Valor Supported by another sharp decline in food prices, inflation posted its best July result since 2022 and returned to within the band targeted by the Central Bank. The latest reading, however, no longer showed the predominantly benign composition seen in recent releases. Experts warn of systemic economic impacts of super El Niño in Brazil Brazil’s key inflation index slows to lowest July reading since 2022 Brazil needs to cut interest rates, Mapfre CIO says According to the Brazilian Institute of Geography and Statistics (IBGE), the Extended Consumer Price Index (IPCA) slowed to 0.07% in July, from 0.16% in June. It was the lowest reading for a July since 2022, when the month posted deflation of 0.68%, influenced by the controversial cut in the Tax on the Circulation of Goods and Services (ICMS) on fuel, electricity, and telecommunications promoted by the Bolsonaro administration. The rate was above the median forecast of 0.03% among 28 financial institutions and consultancies surveyed by Valor Data. The result was within the range of forecasts, which extended from a 0.03% decline to a 0.20% increase. Over the 12 months through July, the IPCA slowed from 4.64% in June to 4.44%. It therefore fell below the ceiling of the inflation target pursued by the Central Bank for the first time since April, when inflation stood at 4.39%. The target set by the National Monetary Council (CMN) is 3%, with a tolerance range of 1.5 percentage points in either direction. Seven of the nine spending categories recorded slower inflation from the previous month. Lower rates were recorded for food and beverages (from -0.24% to -0.67%); household furnishings (from 0.23% to 0.07%); apparel (from 0.17% to -0.66%); transportation (from 0.17% to 0.05%); personal expenses (from 0.25% to 0.22%); education (from -0.02% to -0.03%); and communication (from 0.19% to 0.04%). Higher rates were recorded for housing (from 0.63% to 0.99%) and health and personal care (from 0.23% to 0.40%). According to Fernando Gonçalves, head of the IBGE survey, July was marked by changes in food, fuel, and electricity prices. Food and beverage prices fell 0.67% in July, intensifying the 0.24% decline in June and marking the steepest deflation since July 2024 (-1%). At the same time, fuel prices fell 1.44%, with declines across all categories: ethanol (-2.26%), gasoline (-1.37%), diesel (-1.22%) and vehicle natural gas (-0.08%). Electricity prices, by contrast, rose 3.09%, following tariff adjustments in São Paulo, Curitiba, and Porto Alegre, and were the largest individual upward impact, at 0.13 percentage point. As a result, housing prices—the category that includes electricity—rose 0.99% in July. This was the largest increase for the month since 2021, when it was 3.10%. Despite the improvement, the fact that upside surprises were concentrated in core components is a concern, according to Buysidebrazil economist Rafaela de Sousa. “Among services, the main pressure came from components linked to transportation, particularly ride-hailing services and auto repairs, contributing to a 0.42% increase in underlying services on a monthly basis. The combination of these pressures drove the average of core inflation measures from 0.21% to 0.26%, also above our 0.18% forecast and contrasting with the more benign dynamics seen in recent months,” Rafaela wrote in a note to clients. “In our assessment, the July result represents a less constructive reading for current inflation, particularly because upside surprises were concentrated in core components and because underlying measures accelerated. The data therefore increases the importance of upcoming releases in assessing whether the deterioration observed in July was temporary or reflects a more persistent dynamic.” Food deflation, the main downward force in recent inflation releases, is showing signs of nearing its end, noted Fabio Romão, senior economist at 4intelligence. After a 0.67% decline last month, he expects prices to fall just 0.02% in August. “It is normal for August to have milder deflation than June and July. But there were some indications that this process could remain strong. However, looking at the latest data, such as the agricultural wholesale figures in the July IGP-DI, the preliminary August IGP-M reading and some retail price surveys, the impression is that the food honeymoon is coming to an end,” he said. For Rafael Gonçalves, chief economist at Daycoval, although services inflation has rebounded, the broader picture still points to easing. “It is worth noting that, although the July reading was worse than expected, it continues to slow. Services inflation was running close to 6% in recent readings, but is now at 5.8% over 12 months. That is still a high level, but it shows improvement,” Gonçalves said. He cautioned, however, that the movement is not uniform: labor-intensive services accelerated from 7.13% to 7.30% over 12 months. “The fact that July’s IPCA came in above expectations does not mean that inflation’s favorable period has ended, but merely that there was natural volatility around an already low level. In fact, the expectation for August’s IPCA is for deflation due to the Itaipu bonus,” said Luis Otávio Leal, chief economist at G5 Partners. “Does that mean the path is paved for another interest-rate cut in September? Not necessarily. Despite the favorable environment, a rebound in the IPCA is expected between the end of the third quarter and the fourth quarter, mainly because of the effects of El Niño. In addition, groups such as labor-intensive services continue to accelerate, and the BCB has placed an upside bias on its projection over the relevant monetary-policy horizon [the first quarter of 2028], which is already above the target at 3.2%. Therefore, although we believe there is a non-negligible chance that interest rates will be cut from 14% to 13.75% at the next meeting, we maintain our expectation that rates will remain unchanged,” he added. Banco Inter, meanwhile, highlights the fact that the diffusion index—which measures how widespread price increases are—slowed from 54% to 50%, its lowest level in a year. In addition, the headline result was the lowest for a July since 2014 when 2022 is excluded. “The results of the past two months indicate a return to the disinflation trend observed before the year-end seasonal period. With economic activity showing signs of moderation, we expect the current disinflation process to continue, allowing the Copom to proceed with the current calibration cycle for the Selic,” the bank wrote. It expects quarter-point cuts at the next three Copom meetings, bringing the Selic to 13.25% by year-end.