Core inflation is moderating, but underlying price pressure remains persistent
Recent dynamics
Monthly core inflation was relatively firm during the first half of 2025, including readings of 0.62% in January, 0.47% in March and 0.49% in April. Price pressure then became more moderate during the second half of the year, with most monthly readings settling between 0.23% and 0.40%.
The twelve-month rate ended 2025 at approximately 4.66%. Core inflation remained comparatively sticky in early 2026, with monthly readings between 0.41% and 0.48% from January through May.
More recent data have been softer. Monthly core inflation slowed to 0.24% in June and remained at 0.29% in both July and August. As a result, the rolling twelve-month rate eased to approximately 4.34% in August 2026.
Interpretation and economic signal
The smoothed trimmed-mean core is designed to provide a cleaner view of underlying IPCA inflation by reducing the influence of unusually large price movements and smoothing selected components whose adjustments can be concentrated in particular months.
This makes the measure useful for distinguishing persistent inflation from temporary volatility in the headline index. The current decline in the twelve-month rate, together with softer recent monthly readings, indicates that underlying pressure is gradually moderating.
Even so, a twelve-month core rate around 4.3% remains elevated. The latest data therefore point to improving inflation dynamics rather than a completed normalization of underlying price pressures.
Conclusion
Brazil's core inflation has moved lower from late-2025 levels, while the monthly profile has become noticeably softer since mid-2026. The August twelve-month rate of approximately 4.34% confirms gradual progress in underlying disinflation.
The current signal is therefore one of easing but still persistent inflation. Sustained monthly readings near or below the recent pace would be needed for the twelve-month core rate to decline more decisively.