Brazil’s July monthly inflation the lowest on record

Lower fuel prices pushed overall inflation down in July 2022. Photo: Tânia Rego/TBR

Recent reductions in gas prices (of gasoline and ethanol, in particular) pushed Brazil’s IPCA benchmark consumer price index to -0.68 percent in July. It was the lowest monthly result since inflation measurements began in January 1980, according to the country’s official statistics agency.

Inflation receded beyond the expectations of many major market agents. Itaú, the country’s biggest private bank, foresaw deflation of 0.61 percent. But despite the historical result, the 12-month rate remains in the double digits at 10.07 percent.

Gasoline and ethanol prices dropped by 15.5 and 11.4 percent, respectively. Gasoline contributed to lower prices for 377 sub-items in the IPCA index that use the fuel as an input for production or distribution.

Food prices continue to rise at a faster pace than overall inflation (up 14.7 percent in 12 months). That is especially the case for milk, which has become 41.2-percent more expensive in the last year.

As our Brazil Daily newsletter explained, however, while markets are trimming their year-end inflation forecasts for this year, they have raised expectations for 2023.