Explaining Brazil #211: Deflation for whom?

Brazil registered 0.68-percent deflation in July, suggesting that prices are easing. But a look beneath the headline numbers makes for some sobering discoveries

Inflation is going down in Brazil. Or is it? Last week, the country’s official statistics agency published a 0.68-percent deflation rate for July. It was a historic result — the lowest ever recorded for a single month since at least 1980.

The government celebrated the results with a victory lap, with President Jair Bolsonaro boasting that good things are happening in the country. But a look under the hood of these inflation numbers suggests we should see the data in a much more sober light.

We explain why.

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  • Euan Marshall is an editor at The Brazilian Report and also hosts the Explaining Brazil podcast in the absence of Gustavo Ribeiro. 

This episode used music from Uppbeat. License codes: RMZNWEJWBJJKREIT, HTQHYR9JULXJXHHT, HEDUNQKK7DKJIXZ5.

Background reading:

  • We are about to launch a special 2022 election report with everything you need to know about the races for Congress, governorships, and, of course, the presidency. Click here and ask us about our early-bird discount.
  • Brazil’s consumer prices were down by 0.68 percent last month — the first monthly deflation in over two years and the lowest result for any month since 1980. But the cost of food and services continues to go up.
  • Jair Bolsonaro has been in full desperation mode, trying to increase benefits and win popular support — but it looks to be too little, too late, writes Amanda Audi.
  • These measures are the reason inflation is going down in the short term. But they are also why inflation will remain high in the long term. Inflation optimism is mostly confined to this year, with markets raising 2023 forecasts over the past 18 weeks. 

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