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RGE Analysts

Venezuelan Inflation Unlikely to Fall

We expect Venezuela’s inflation to start showing some upward pressure on food prices due mainly to production and distribution disruptions to agricultural products as a result of heavy rainfall at the end of 2010 and the devaluation in early 2011. However, government price controls will likely prevent inflation from spiking and lead to a gradual correction in prices. We expect the Caracas CPI headline to hover around 2.2% m/m (27.1% y/y) in January. Additional pressures from sectors such as education, restaurants and health will also be present in January and should keep core inflation around similar levels (2.2% m/m, 29% y/y), according to our core estimate.

Caracas Headline, Core and Food Inflation (% y/y)

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Source: Central Bank of Venezuela & RGE

Editor’s Note: This post is excerpted from a much longer analysis available exclusively to RGE Clients:Mexican Central Bank Comfortable With Inflation Outlook

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