The Brazilian Institute of Geography and Statistics (IBGE) reported on the 26th that the mid-August consumer price index (IPCA) rose 4.24% year-on-year, while falling 0.40% month-on-month. The monthly decline was the first since August 2025, signaling easing inflationary pressures. The annual rate slowed from July's 4.52% increase and came in below the median forecast of 4.34% in a Reuters poll. Within the central bank's target range, the monthly drop also exceeded the expected 0.30% decline. The downward factors included declines in housing costs of 1.41%, transportation of 1%, and food and beverages of 0.57%. The central bank this month cut its policy rate by 25 basis points to 14%, marking the fourth consecutive rate cut and leaving room for further easing. The next meeting is scheduled for September 15-16.
Rate cut and easing bias push Brazilian bond yields down.
Brazil's central bank cut rates and signals further easing, likely lowering yields globally.
Brazil's easing cycle and lower inflation weaken BRL, making USD stronger.
