Brazil prices fall for the first time in a year in August

SAO PAULO, Sept 10 (Reuters) - Brazil's inflation came in negative in August for the first time in a year, but the fall in consumer prices was smaller than markets had expected, data from statistics agency IBGE showed on Wednesday.

Consumer prices in Latin America's largest economy dropped 0.11% in August, following a 0.26% growth in July, the agency said. The result came in under the 0.15% fall forecast by economists polled by Reuters.

It was the first negative monthly reading since August 2024, when prices fell 0.02%, IBGE noted.

According to IBGE manager Fernando Goncalves, the drop in prices may be linked to an increase in the domestic supply of products affected by U.S. tariffs on Brazilian goods.

"Several products such as mangoes, papayas, and others are showing a decline, and this may be the effect of U.S. tariffs. Coffee may be experiencing the impact," IBGE manager Fernando Goncalves said.

U.S. President Donald Trump slapped a 50% tariff on many Brazilian imports to the U.S. to fight what he has called a "witch hunt" against former President Jair Bolsonaro, who is on trial for plotting a coup to remain in power after he lost the 2022 election.

August inflation data suggests Brazil's central bank may need to proceed cautiously with interest rate cuts, said Camilo Cavalcanti, portfolio manager at Oby Capital.

"The persistence of service inflation and its widespread nature reinforce the need for careful stance," he said. Services prices rose 0.39% in August.

At its most recent meeting, Brazil's central bank held its benchmark Selic rate steady after a 450 basis-point tightening cycle kicked off in September.

Over the 12 months through August, consumer prices rose 5.13%, easing from 5.23% in July but still above the 5.09% expected by markets. The central bank targets inflation at 3%, with a tolerance band of 1.5 percentage points in either direction.