Brazil’s August inflation higher than expected

Brazil's August inflation higher than expected
Fuel prices have skyrocketed in 2021. Photo: Joa Souza/Shutterstock

Brazilian consumer prices measured by the IPCA index shot up 0.87 percent in August — the highest inflation rate for the month on record. Economists were expecting an increase of 0.71 percent, according to Reuters.

The monthly change in consumer prices took 12-month inflation to 9.68 percent, bringing it ever closer to levels observed during the 2014-2016 crisis. The upper limit of the government’s target band sits at 5.25 percent. Markets believe inflation will peak in August and September, before easing in the final stretch of the year. 

According to the latest Focus Report, a Central Bank survey of top-rated investment firms, the median expectation for year-end inflation is 7.58 percent. This median has been raised consistently over the past 22 weeks.

Fuels were the main inflation drivers last month, up nearly 3 percent over the month of August. Until last week, fuel prices had increased over 32 percent this year. “Prices are influenced by Petrobras’s pricing policy, which is pegged to the U.S. Dollar, and by the fact that biofuels became more expensive,” said André Felipe Almeida, of the Brazilian Institute of Geography and Statistics.