March 12 (Bloomberg) -- Venezuelan inflation, the highest in Latin America, may slow in April as tax cuts on consumer goods begin to take effect, Finance Minister Rodrigo Cabezas said.

Value-added tax cuts and a measures not yet announced will help Venezuela slow inflation to meet the central bank's 12 percent target by year-end, Cabezas told the state news agency, without detailing the government's plans.

Annual inflation reached 20.4 percent in Venezuela in February, as soaring government spending pumped cash into the economy and exchange controls trapped money in the system.

``Prices are going to fall a little bit in March because they cut the value-added tax,'' Miguel Octavio, head of research at BBO Financial Services in Caracas, said in a telephone interview. ``But that doesn't mean inflation will slow for long. It's temporary, it's a one shot deal.''

President Hugo Chavez ordered the nation's value-added tax slashed from 14 percent to 11 percent on March 1, and further lowered to 9 percent by July, in a bid to stem the soaring prices that threaten his political popularity.

Targeting

His government also tightened price controls on food and ``basic need'' products to freeze food costs, which increased an average 36 percent in the last 12 months.

The central bank meanwhile unveiled a monetary reform package last week that would slash three zeros from Venezuela's currency by the start of 2008, in a bid to contain retail prices by slowing incremental price hikes.

Octavio, who called the central bank's 12 percent target ``unbelievable'' given the 3.7 percent inflation the country racked up in the first two months of the year, doubted the government's measures.

``These things attack the effects of inflation, not the origin of the problem,'' he said. ``Unless the government announces it's going to start spending less tomorrow, I don't know what they're talking about.''

To contact the reporters on this story: Theresa Bradley in Caracas at tbradley7@bloomberg.netGuillermo Parra-Bernal in Caracas at gparra@bloomberg.net.

Last Updated: March 12, 2007 13:46 EDT