Venezuela Inflation


Venezuela: Inflation moderates in March

April 5, 2011

In March, the consumer price index for the Caracas Metropolitan Region added 1.55% over the previous month, which represented a notable slowdown from the 2.22% price increase recorded in February. The monthly rise was mostly driven by higher prices for household equipment (+4.67% month-on-month), while prices for food and non-alcoholic beverages increased a more moderate 1.09%. As a result of the relatively modest monthly price increase, annual inflation declined from 29.8% in February to 28.7% in March, falling for the first time since November last year. The core inflation index, which excludes volatile items such as fresh food, oil, and other goods where the government exercises price controls, rose a pointier 2.88% over the previous month, pushing annual core inflation up to 33.2%. Rising core inflation suggests that overall inflationary pressures continue. The elimination of the preferential exchange rate (which represents a de-facto devaluation) increased import bills, and therefore the overall rate of inflation. Moreover, prices are also stressed due to tight domestic supply, as private investment has suffered from an increasingly hostile business environment over the last years. Annual average inflation remained unchanged in March at 29.4%. Meanwhile, the Central Bank expects inflation will increase 27% by the end of 2011.


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