Economic Briefing Indicator - Venezuela - Inflation

In October, consumer prices added 2.11% over the previous month, which was below the 2.50% price increase observed in September. The reading, however, was in line with market expectations. Higher prices for food and beverages as well as for housing equipment constituted the main driver of the monthly price increase. Owing to the below-average October reading, annual headline inflation fell from 36.0% in September to 35.6%.

The core inflation index, which excludes more volatile items such as fresh food, oil and several other goods for which the government controls the price level, added an even more pronounced 2.44% in October. Nevertheless, annual core inflation remained unchanged at September's 27.0%. So far, government efforts to contain inflation appear to have been only marginally successful, as anti-inflationary measures continue to be accompanied by excessive public spending, especially ahead of the 23 November regional elections.

Authorities previously raised interest rates and sold dollar-denominated debt that could be paid for in bolívares in order to soak up liquidity. The government recently recognized that inflation may surpass its 27.0% projection for this year. According to the 2009 budget, authorities anticipate inflation to moderate to 15.0% next year.


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