The good and bad news about Brazil’s July mid-month inflation

The IPCA-15, Brazil’s mid-month inflation index, came in at 0.3 percent in July. Although the numbers show price rises are decelerating, the index still exceeded market expectations (0.23 percent, according to Bloomberg). In 12 months, the IPCA-15 rose from 4.06 percent to 4.45 percent now.

The index is a reliable bellwether of official inflation, and its latest readings have shown that Brazil has yet to slay its inflation dragon. 

Inflation was widespread in the first half of July. However, one positive note was a 0.44 percent decrease in food prices, and increases in the cost of eating out slowed in comparison to the previous month.

Food inflation weighs heavily on Brazil’s low-income population (a majority of Brazilians) and can be a massive political hot potato for governments — and many, left or right, try to scramble to tame it. 

When food costs rose unusually rapidly during the pandemic, then-President Jair Bolsonaro urged vendors to freeze prices. This year, when floods ravaged Rio Grande do Sul, Brazil’s southernmost state and its leading rice producer, the Luiz Inácio Lula da Silva administration tried (but failed) to hold an auction for importing rice at capped prices.

The major inflation drivers of the latest IPCA-15 reading were transportation and housing. For the former, the 1.12 percent overall increase was pushed up by a marked 19.21 percent rise in airfares. The cost of housing, meanwhile, was brought up by a 1.2 percent increase in residential electricity bills.

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