In brief
32% in August, the deepest deflation in four years, as the Itaipu bonus pulled down power bills.
22%, below forecasts, and the market is already discussing rate cuts at every meeting through December.
What we know
05Verified fact · material
The IPCAInflationMacroChange in the price level, tracked in Brazil primarily through the IPCA index.Open in the Market Map ↗ fell 0.32% in August, after a 0.07% rise in July, the deepest monthly deflation in four years, against a median forecast of -0.29%, per IBGE, Agência Brasil, InfoMoney and Bloomberg Línea.
Data point that defines the event.
Verified fact · material
Twelve-month inflationInflationMacroChange in the price level, tracked in Brazil primarily through the IPCA index.Open in the Market Map ↗ eased from 4.44% to 4.22%, below the 4.27% median, and 2026 to date stands at 3.11%, per Bloomberg Línea, InfoMoney and Agência Brasil.
Measures the distance to target before the Copom.
Verified fact
Housing fell 1.87%, the largest August drop since the Real Plan, with electricity -7.63% on the Itaipu bonus; transport fell 0.86%, with gasoline -0.59% and ethanol -3.95%, and food fell 0.34%, per Agência Brasil.
Breakdown of the deflation.
Sources[01]Verified fact
After the data, Treasury bond yields fell: the fixed-rate 2029 went from 13.85% to 13.77%, the 2032 from 14.18% to 14.08% and the IPCAInflationMacroChange in the price level, tracked in Brazil primarily through the IPCA index.Open in the Market Map ↗+ 2032 from 7.72% to 7.57%, per InfoMoney; DI futures also fell, per CNN Brasil.
Curve reaction.
Verified fact
BofA cut its end-2026 Selic forecast from 13.75% to 13.25%, now expecting 0.25-point cuts at every remaining Copom meeting, with David Beker citing improving core inflationInflationMacroChange in the price level, tracked in Brazil primarily through the IPCA index.Open in the Market Map ↗, slowing activity and rising delinquency, per CNN Brasil.
First revision by a major house after the data.
Sources[04]
Transmission to assets
Market read-through
For the yield curveYield CurveMacroBrazil's market interest rates across maturities, reflected in government bonds, Tesouro Direto and DI futures.Open in the Market Map ↗, the downside surprise removes the risk of a September pause and moves the debate to December; for inflationInflationMacroChange in the price level, tracked in Brazil primarily through the IPCA index.Open in the Market Map ↗-linked bonds, breakevens ease.
25-point cut.
Portfolio impact
02Below-forecast inflationInflationMacroChange in the price level, tracked in Brazil primarily through the IPCA index.Open in the Market Map ↗ lowers expected rates along the curve.
Positive for fixed-rate bonds; breakevens ease.
What would change the view: Effect partly offset by oil above US$ 100.
Deflation widens room for sequential 0.25-point cuts.
Reinforces the cut and the cycle through December.
What would change the view: Depends on the fuel shock and the Fed decision.
Direction is an explanatory hypothesis, not a forecast or recommendation.
Next signals
What to watch
- Copom decision and statement on 9/16.
- September IPCAInflationMacroChange in the price level, tracked in Brazil primarily through the IPCA index.Open in the Market Map ↗-15 and the oil pass-through to fuels.
- Selic revisions by other houses after BofA.
Limits of the reporting
What remains uncertain
- The -0.29% median is from the Reuters survey cited by InfoMoney; Agência Brasil cites -0.23% from the 9/8 Focus, a distinct cut.
- IBGE and Poder360 were not directly accessible; figures come from Agência Brasil, InfoMoney and Bloomberg Línea.