Price Index Overview
According to the Extended Consumer Price Index (IPCA) released by the Brazilian Institute of Geography and Statistics (IBGE) on September 10, the August growth rate was minus 0.11% month-on-month, marking the first negative reading since August 2024, one year ago. The cumulative January-August rate stands at 3.15%, with the 12-month rate at 5.13%, continuing to exceed the central bank's 2025 inflation target (target 3.0%, upper limit 4.5%) for the 11th consecutive month.
Analysis by Category
Five of nine categories recorded negative rates. Major declining categories were housing-related at minus 0.90% (contributing minus 0.14 percentage points), food and beverages at minus 0.46% (contributing minus 0.10 percentage points), and transportation at minus 0.27% (contributing minus 0.06 percentage points). Within housing-related expenses, electricity rates fell significantly by 4.21%, becoming a major factor pushing down the overall index.
Background of Electricity Rate Decline
Decline Despite Additional Fee Increases: In August, additional electricity fees were raised from "Red 1" to "Red 2" (7.88 reais per 100 kilowatt-hours), but electricity rates temporarily declined due to the distribution of the "Itaipu Bonus." This bonus is a system that returns to consumers the previous year's revenue balance from Brazilian-side electricity sales at the Itaipu Binational Hydroelectric Plant, with the 2024 revenue-based bonus reflected in August electricity rates.
Other Price Change Factors
For food and beverages, abundant harvests of tomatoes, potatoes, and onions were the main factors in price declines. In transportation, airline ticket price declines following the end of school holidays and partial fuel price decreases due to the increase in ethanol blending rates in gasoline to 30% implemented from August contributed to the overall decline.