Brazil’s broad inflation gauge, the IGP-M compiled by Fundação Getulio Vargas (FGV), ended 2025 with a cumulative fall of 1.05%, underscoring a marked easing in wholesale price pressures over the year. December closed marginally negative at -0.01%, a result that surprised market expectations and reflected broader shifts in commodity and input markets.
IGP-M deflation Brazil signals easing wholesale pressures
The downward movement in the IGP-M was driven largely by the Índice de Preços ao Produtor Amplo (IPA), which accounts for 60% of the index. The IPA dropped 0.12% in December and accumulated a 3.35% decline across 2025, pointing to softer costs for agricultural and industrial inputs. Improved harvests and a greater supply of key commodities helped relieve pressure in the supply chain and limited price pass-through to subsequent stages.
By contrast, price measures closer to end consumers rose moderately over the year. The Índice de Preços ao Consumidor (IPC), which carries a 30% weight in the IGP-M, increased 0.24% in December and finished 2025 up 4.08%. The construction cost index (INCC) ended the year with a 6.10% increase, reflecting higher prices for some materials and labour.
These divergent dynamics underline a persistent gap between wholesale prices and the inflation felt by households. While producers and suppliers experienced relief from falling input costs, consumers continued to face higher prices in services and housing-related expenses, moderating the overall effect of wholesale deflation on everyday living costs.
The IGP-M’s sensitivity to commodity prices, exchange-rate swings and input costs means it typically reacts faster than other inflation gauges to changes in global markets. In 2025, a combination of weaker global demand growth and larger commodity supplies contributed to the reduction in wholesale inflation in Brazil.
For producers, particularly in agriculture, the mixed outcome carries both benefits and risks. Lower prices for fertilisers, seeds and other inputs reduce production costs and can improve margins when commodity prices are stable. However, falling wholesale prices may also signal weaker commodity prices at sale, compressing farm revenues. As a result, producers will need to manage cash flow and marketing strategies more carefully in an environment where input relief may not be mirrored by sales prices.
Monetary policy will be closely watched as a result. Brazil’s policy rate remained at 15% per annum into late 2025. Markets expect that if inflation continues to moderate and fiscal conditions remain under control, the central bank could consider gradual reductions in policy rates during 2026. Any adjustment, however, will depend on incoming data on activity, inflation persistence in consumer prices and external developments.
The IGP-M result is a reminder that headline inflation indicators can move in different directions across the economy. For investors and policymakers, the index provides an early read on supply-side cost pressures, while consumer-focused measures better capture the inflationary experience of households. As 2026 begins, attention will focus on whether easing wholesale inflation feeds through to broader disinflation and creates room for cautious monetary normalisation.
Source: Pensar Agro; data from Fundação Getulio Vargas.
Key Takeaways:
- Brazil’s IGP-M closed 2025 with cumulative deflation of 1.05%, driven by lower wholesale costs.
- IPA, the main IGP-M component, fell 3.35% in 2025, reflecting easing input and commodity prices.
- Consumer prices and construction costs rose, with IPC up 4.08% and INCC up 6.10% for the year.
- Lower wholesale inflation may allow gradual monetary easing in 2026 if economic and fiscal conditions permit.
