Brazilian inflation drops below 10 percent for first time in a year

Inflation continued to cool down in August as gas prices fell, a welcome reprieve for consumers and the Jair Bolsonaro government — which, three weeks from Election Day, is trying to make voters believe the president is steering the Brazilian economy in the right direction.

The IPCA consumer price index dropped 0.36 percent in August, in what was a second straight month of deflation. With the results, 12-month inflation dropped below 10 percent for the first time in a year, now sitting at 8.73 percent. 

But today’s inflation report is not yet a conclusive sign that price increases — which have been scorching over the past two years — have turned a corner.

The results are in line with forecasts from Central Bank chair Roberto Campos Neto. Two weeks ago, he said he expected prices to go down for the next “two to three months.” Mr. Campos Neto forecasts year-end inflation to be at 6.5 percent or lower.

On Tuesday, the central banker said the monetary authority would “keep its guard up” against inflation. Most market analysts expect interest rates to stay put at 13.75 percent for the next Monetary Policy Committee meeting in two...