REGRESA

1. Food prices drive inflation lower, but Copom rules out short-term Selic rate cuts

Brazil’s Broad National Consumer Price Index (IPCA) rose by a modest 0.07% in July, driven by a significant 0.67% decline in the food and beverages category — the sharpest drop for the segment since July 2024. Consumers benefited from favorable weather conditions, which increased the supply of fresh produce and helped offset price increases in other sectors, such as housing, which was affected by higher electricity costs resulting from the activation of energy tariff surcharges.

Despite this short-term relief in consumer prices, the long-term macroeconomic outlook still calls for caution. Brazil’s Central Bank released the minutes of the Monetary Policy Committee (Copom) meeting, indicating that the Selic benchmark interest rate is likely to remain at restrictive levels for a longer period. The institution expressed concerns about unanchored inflation expectations, the resilience of the services sector, a still-heated labor market, and ongoing fiscal uncertainties, signaling that monetary policy will remain tight to ensure that inflation converges toward the official target.

Valor Econômico: Deflação de 0,67% em alimentação e bebidas no IPCA é a mais intensa desde julho de 2024
Exame: Em ata, BC indica manutenção de juros altos por mais tempo

2. Congress approves greater spending flexibility for 2026 and introduces new fiscal triggers for 2027

Brazil’s National Congress has approved a complementary bill authorizing the government to increase spending outside the limits established by the country’s fiscal framework and primary budget target in 2026, an election year. The measures include the early release of R$3 billion from the Pre-Salt Social Fund, billions of reais in additional transfers to the Ministry of Defense, as well as subsidies and tax incentives for the ethanol sector. The move, which was made in response to strong political pressure, could increase the estimated public deficit for the year to R$57.5 billion.

In an effort to reassure financial markets, the economic team included in the same legislation a new set of fiscal triggers that will only take effect in 2027. These mechanisms would limit the growth of certain mandatory expenditures in the event of a deficit, while also excluding extraordinary revenues from oil sales from the calculation of Net Current Revenue, thereby preventing the automatic expansion of constitutionally mandated budget allocations. The Ministry of Finance estimates that these new fiscal restraint measures could save approximately R$10 billion in future budgets.

Folha de S.Paulo: Governo aproveita texto que amplia gastos em 2026 para sinalizar ajuste nas contas em 2027

3. Local uncertainty drives J.P. Morgan to downgrade Brazil

US investment bank J.P. Morgan has revised its recommendation on Brazilian equities, lowering its rating from “overweight” to “neutral” in its Latin American strategic portfolio. The change in outlook was driven by the bank’s assessment that the current cycle of Selic rate cuts is nearing its end, along with projections pointing to slower economic growth and a weakening domestic credit market. Together, these factors are expected to create a more challenging environment for corporate earnings.

Another key factor behind the downgrade is the increased volatility associated with Brazil’s October 2026 elections. J.P. Morgan noted that the next administration will face the challenge of managing persistently high real interest rates and recurring fiscal deficits, conditions that have reduced international investors’ appetite for risk. Following the bank’s announcement, Brazilian assets experienced an immediate impact, with foreign capital outflows contributing to a sharp decline in the Ibovespa stock index and a rise in the US dollar against the Brazilian real.

CNN Brasil: JPMorgan rebaixa recomendação de investimentos no Brasil para neutro

4. Federal government signs decree expanding the free electricity market to households and small businesses

The Brazilian federal government has signed a decree regulating the expansion of the free electricity market to low-voltage consumers, extending the power of choice beyond large industrial users. Under the new rules, households, small commercial establishments, and rural properties will be able to select their own electricity suppliers instead of relying exclusively on local distribution companies. According to the Ministry of Mines and Energy, increased competition is expected to reduce electricity costs for consumers by approximately 20% to 22%.

The transition to the Free Contracting Environment will be implemented gradually. Beginning in November 2027, rural businesses and low-consumption industries will be allowed to migrate to the new system, followed by residential consumers in November 2028. To ensure system reliability, the decree establishes that existing distribution companies will continue to act as suppliers of last resort until 2030, guaranteeing uninterrupted service if a customer’s chosen provider fails. Brazil’s National Electric Energy Agency (Aneel) will be responsible for establishing the final transition rules and consumer protection guidelines.

Estadão: Lula assina decreto do mercado livre de energia para consumidores residenciais e pequenas indústrias
O Globo: Lula regulamenta mercado livre de energia para consumidores residenciais; saiba o que muda

5. Nvidia and Wall Street negotiate $500 billion agreement to expand artificial intelligence infrastructure

Nvidia, the world’s leading chip developer, has signed memorandums of understanding with major Wall Street firms — including Apollo, Blackstone, BlackRock, KKR, and Goldman Sachs — to mobilize more than $500 billion in third-party capital. This unprecedented initiative aims to create credit platforms dedicated exclusively to financing the global artificial intelligence ecosystem, supporting the large-scale construction of data centers, energy infrastructure, and the acquisition of high-performance computing equipment.

The strategy is designed to connect technology clients with long-term financing, ensuring the continued expansion of computing capacity without putting pressure on corporate balance sheets or forcing Nvidia to reduce prices. The move further reinforces artificial intelligence as a new and essential global infrastructure asset class. However, the scale of the initiative and the significant level of projected debt associated with the package initially prompted a cautious reaction from financial market investors.

Folha de S.Paulo: Nvidia e gigantes de Wall Street negociam pacote de US$ 500 bi para expandir infraestrutura de IA