April 8, 2008 (venezuelanalysis.com)– Venezuela's Central Bank announced that the country's inflation rate had dropped from 2.1% in February to 1.7% in March, reflecting a modest success of the government's effort to rein in inflation. The Central Bank measured the inflation rate with a new and more comprehensive indicator.
The cumulative inflation rate for the first quarter of 2008 is 7.1%.
Following a highly inflationary period in January, when the inflation rate reached 3.1%, one of the highest monthly inflation rates of the Chavez presidency, the government initiated a number of new measures to bring inflation down.
Also, the government gave up its goal of keeping inflation at no more than 11% for 2008. Venzuela's minister of Planning and Development, Haiman El Troudi, said today that he expects inflation to be around 19.5% by the end of 2008. El Troudi admitted the current inflation "is not what we had hoped for."
Some of the measures to bring down inflation, which appeared to have some effect this month, included raising interest rates and lowering the black market exchange rate of the Venezuelan currency, the Bolivar, by making access to the official exchange rate easier. Also, public spending has not increased this year as much as it did the previous year.
According to El Troudi, "We are winning the battle against speculation in currency exchange, in prices, and in finances."
The new method for measuring inflation is far more comprehensive and thus more accurate than the previously used method, explained Venezuela's president of the National Statistics Institute, Elias Ejuri, yesterday. "We are now working in eight additional metropolitan areas and in a total of 72 medium and small towns… Now we will have an index that truly reflects the variation of prices in the entire country," said Eljuri.
The new index now covers 300,000 prices in 22,000 establishments, while the previous one covered only 70,000 prices only in Venezuela's two largest cities, Caracas and Maracaibo, according to the state news agency ABN.
El Troudi, argued during the presentation of the interest rate yesterday that given the dramatic price increases that have recently taken place throughout the world, "The economic policies of the Venezuelan government give notice of safeguards that allow us to be quite calm in the face of the economic imbalance that exists worldwide."
As the New York Times reported last week, the price of rice, one of the world's basic food staples, has more than doubled in the past three months.
In Venezuela the largest prices increases in March were for alcoholic beverages (4.5%) and for health care (3.1%).