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Matheus Pizzani, an economist at PicPay, explains that the June IPCA reading shows inflation cooling as food and fuel prices fall, even as services keep pressure. He says the softer numbers could give the Copom room to trim the Selic at the next meeting, though the risk of El Niño could lift prices again later. Other analysts see a healthier inflation mix, with easing goods and restrained services helping, but the annual rate remains above the central bank’s target ceiling, adding uncertainty for policy and households as the year unfolds. The piece looks at how these shifts could shape policy bets and everyday prices in the months ahead.
- Inflation slowed in June as prices cooled
- Food and fuel prices fell, helping inflation drop
- Services still pressured inflation
- Economists say Copom may cut the Selic rate in August
- El Niño risk could push prices higher later in the year
Inflation cools in June, opening room for a Selic cut, but El Niño risks linger
Key figures at a glance
In June, the IPCA rose by 0.16% month over month, well below expectations of around 0.31% and under May’s 0.58%. This marked the slowest June in three years, according to the IBGE.
The year-to-date inflation stood at 3.36%, and the 12-month rate reached 4.64%, just above the central bank’s 4.5% upper bound for the target. The central bank’s benchmark rate, the Selic, is currently 14.25% per year.
Food, energy easing; services still firm
The slowdown was led by a drop in food and beverages, which fell 0.25% in June and had been a major driver of earlier inflation. This eased the overall index even as housing costs rose, driven by higher electricity bills (0.63%).
Fuel prices moved lower, down 0.48% in June after recent increases in oil-associated prices. The drop in food, alongside a softer energy bill, helped pull down the index, offsetting some pressure from services.
The energy component showed electricity prices easing to a 1.53% rise in June, down from 3.67% in May. Some tariff adjustments occurred in a few cities, and a concessionaire in Rio resumed tariff increases. An August boost from the Itaipu hydroelectric project is expected to help cap energy costs.
Within services, the cost of eating out fell modestly, helping to temper service inflation. However, most other service categories, including housing-related services, remained under pressure, partly tied to demand.
Market expectations for policy moves
Analysts say the June results reinforce a view that the central bank has room to ease policy. A 0.25 percentage point cut to the Selic at the upcoming August meeting, held on August 4–5, is increasingly seen as plausible. The improvement in core inflation measures, along with the softer headline figure, supports this assessment.
El Niño risks and the price outlook
Experts note that a pending El Niño could shape the price path in the second half of the year. Forecasters warn it could raise food prices if agricultural conditions tighten, potentially offsetting the near-term cooling.
Frequently asked questions
- Will June inflation slow boost Copom’s chance to cut rates in August? Yes. June IPCA was 0.16%, lower than expected. Many economists see a 0.25 percentage point cut in the Selic at the August Copom meeting. El Niño risks could still push prices later.
- What drove the June slowdown in inflation? Food and fuels led the brake. Food fell 0.25%, fuels dropped 0.48%. Electricity rose, but more slowly than before.
- How did services behave in June? Services inflation eased. Dining out fell from 0.49% to 0.15%. Still, housing and some services kept some pressure.
- Where does this leave inflation versus the target? IPCA in the last 12 months is 4.64%, above the 4.5% ceiling. This helps the case for a rate cut, but the gap remains.
- What risks could change the outlook for the rest of the year? El Niño could push food and energy costs higher later. Some goods and services could cost more. A strong job market could keep services prices rising. These risks may tweak the path.