Venezuela Inflation


Central Bank in the spotlight over alleged government pressure

On 30 December, the Central Bank unveiled the monthly figures for November and December. The Bank had not published inflation data since 7 November. This led many analysts to suspect that the government had increased its pressure on the Central Bank, which has always been considered one of the most reliable institutions in Venezuela. Such pressure from the government would threaten the Bank's independence and objectivity. Analysts' suspicions have been partially substantiated by the unusual nature of the Central Bank's press release. The Bank released only month-on-month variations, without showing annual inflation, the sub-categories of the index, nor the closely-watched scarcity index. Instead, the Central Bank vowed to work on new economic indicators that better reflect the situation of the country. In addition, the document surprised analysts due to its strong ideological and pro-government tone.

According to the press release, consumer prices rose 2.20% over the previous month in December, which was below the 4.80% increase tallied in November. December's print marks the lowest increase in prices since February 2013. According to the month-on-month variation data released by the Central Bank, annual inflation is claimed to have moderated slightly in December, declining from 58.1% in November to 56.1%.

Per its 2014 budget, the Venezuelan government expects inflation to end the year between 26.0% and 28.0%. LatinFocus Consensus Forecast panelists, however, expect inflation to reach 51.7% by the end of this year, which is up 5.2 percentage points from last month's forecast. In 2015, the panel sees inflation at 40.9%.

In the political arena, President Nicolas Maduro reshuffled his economic cabinet yet again on 15 January. Rodolfo Marco Torres replaced Nelson Merentes as Finance Minister. In turn, Merentes is expected to be reappointed as Central Bank governor. Rafael Ramirez was confirmed as president of the all-important national oil company, PDVSA.

The government continued to expand usage of the exchange rate offered through the Sicad - currently at around VEF 11.30 per USD - although Maduro vowed to maintain the bolivar at 6.30 per USD. The broader use of the ancillary exchange rate system reinforces the general view that the government is implementing a stealth devaluation of the bolivar. Against this backdrop, LatinFocus Consensus Forecast panelists expect the bolivar to reach 10.84 by the end of this year. In 2015, the panel sees the bolivar weakening further to 13.87 VEF per USD.

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Venezuela Inflation Chart

Venezuela Inflation December 2013

Note: Annual and monthly variation of consumer price index in %.
Source: Venezuela Central Bank.

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