Brazil’s IPCA-15 inflation gauge eased further below market expectations in December, reinforcing signs that price pressures are slowing and that full-year inflation is likely to end below the upper limit of the central bank’s target range.
The IPCA-15 rose 0.25% in December, slightly faster than the 0.20% increase recorded in November, according to data released on Tuesday by the Brazilian Institute of Geography and Statistics.
The reading nonetheless came in below the 0.27% median estimate in a Reuters poll.
On a year-on-year basis, the index moderated to 4.41% in December, down from 4.50% in November and marginally below the 4.43% forecast by economists surveyed by Reuters.
The result remains within Brazil’s inflation target of 3.0%, which allows for a tolerance band of 1.5 percentage points above or below the goal.
Inflation slows after peaking in April
The December reading capped a year of gradual moderation in inflationary pressures.
The 12-month IPCA-15 rate has declined considerably since peaking at 5.49% in April, the highest level recorded this year.
The index increased 4.71% in 2024.
The slowdown has taken place amid a restrictive monetary policy stance. Brazil’s benchmark Selic rate stands at 15%, a level the Central Bank has said is appropriate to maintain for an extended period to steer inflation back toward its target.
Under Brazil’s continuous inflation-targeting regime, the target is deemed to have been breached if inflation remains outside the tolerance band for six consecutive months.
In that event, the Central Bank of Brazil is required to publicly explain the reasons for the deviation.
Official inflation data for December, along with full-year figures for 2025, are scheduled to be released on January 9 by the IBGE.
Transportation and airfares drive December increase
In December, the Transportation group exerted the greatest upward pressure on the index, rising 0.69%.
This increase was driven largely by a massive 12.71% surge in airfares.
Fuel prices also rose 0.26% month-over-month. While ethanol (+1.70%) and gasoline (+0.11%) saw gains, vehicle gas and diesel offered some relief, falling 0.26% and 0.38%, respectively.
Clothing posted the second-largest increase (+0.69%), followed by Personal Expenses (+0.46%).
Meanwhile, Food and Beverages—the index’s heaviest component—edged up just 0.13%. Notably, costs for food at home actually dropped 0.13%, helping to dampen broader inflationary pressures.
Housing and food dominate annual gains
Housing recorded the highest cumulative annual increase at 6.69%, while residential electricity surged 11.95%, serving as the primary driver of inflation for 2025.
The Food and Beverages sector provided the second-largest contribution (+3.57%).
Notably, ground coffee was a significant outlier, registering a steep annual hike of 41.84%.
Looking ahead, current data suggests inflation could subside further in the first half of 2026.
According to senior economist André Valério, Q1 2026 shows signs of lower inflationary pressure compared to the same period in 2025, which would allow for a more rapid deceleration of the 12-month rate.
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