August inflation drops 0.32%, raising bets on next week's 14% interest rate cut

Official monthly inflation in Brazil fell 0.32 percent last month, exceeding market expectations of a decline of only 0.28 percent. The Instituto Brasileiro de Geografia e Estatistica (IBGE) reported this as the largest monthly deflation in four years. A specific factor lowered electricity bills for consumers. This discount was linked to excess revenue from the Itaipu hydroelectric dam, a state-owned facility shared with Paraguay, which resulted in a 7.63 percent fall in the price of residential energy that month. In August, the food and beverage sector also declined by 0.34 percent, contributing to three consecutive months of drops in this category. The data created conditions for the Central Bank of Brazil to cut its basic interest rate, known as the Selic, to 13.75 percent by next week's meeting. Economists warn that risks remain on the radar regarding the El Nino phenomenon and ongoing price adjustments in services.