The weather willing, food inflation in Brazil could ease until Q1 2023

Factors linked to the war in Ukraine, such as higher oil prices and greater international demand, have been driving up food prices in Brazil. Food inflation in the country rose much faster than general inflation earlier this year, and has now been decelerating at a slower pace. But there is good news, as Brazilians could continue to feel the drop in food prices recorded in September in their pockets at least until the first quarter of next year — if the weather helps. 

Overall prices rose by 4.09 percent year-to-date (and 7.17 percent in 12 months), per the official IPCA consumer price index for September. 

September was the third consecutive month of deflation in Brazil (prices were down by 0.29 percent) — but just the first since November 2021 to see a drop in the overall prices of food items (-0.51 percent). 

As with previous months, the price of gasoline had the biggest impact on September deflation, with the fuel getting 8.33 percent cheaper at the pump last month. 

Falling gasoline prices alone accounted for -0.42 percentage points of the overall deflation result, signaling that President Jair Bolsonaro’s unorthodox measures to keep fuel prices down continue to pay off, likely aided also by the apparent peak of the monetary tightening cycle. 

With one eye on his re-election campaign, Mr. Bolsonaro sanctioned a law in June capping state-levied taxes on energy and transport. The president has also continuously fought with the state-controlled oil and gas company Petrobras, forcing three changes of leadership until finally appointing a more malleable CEO. 

Caio Paes de Andrade has been at the helm of Petrobras for just over three months, during which...