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Venezuela Prices Rise Most in Three Months as Shortages Drive Up Staples

Venezuelan consumer prices in October rose the most in three months as shortages of staple foods such as milk and sugar pushed inflation higher.

Consumer prices rose 1.5 percent last month, up from a 1.3 percent climb in September, according to the central bank’s benchmark Caracas price index, matching the median forecast of seven economists surveyed by Bloomberg. Annual inflation slowed to 27.6 percent from 28.5 percent, the bank said.

The rise in consumer prices snaps five months of disinflation as the Venezuelan economy has yet to emerge from a recession that began last year. Inflation will accelerate in the next few months as the government relaxes food price controls to avoid shortages, said Asdrubal Oliveros, director Ecoanalitica.

“The government is playing a game of trying to strike a balance between food shortages and avoiding raising prices,” Oliveros said at the sidelines of an event in Caracas. “Going forward, I don’t see a reduction in inflation like we saw in the last few months.”

Finance Minister Jorge Giordani said last month that inflation was decelerating as the government assumes greater control over the production, distribution and sale of food goods.

Central bank President Nelson Merentes said on Nov. 3 that consumer prices will rise 26 percent this year, and that the bank will target single digit inflation by 2013.

Recession

Monthly inflation as measured by the central bank’s national consumer price index, which measures prices across the country, was also 1.5 percent in October, the bank said today in an e-mailed statement. Annual inflation slowed to 27.5 percent, the bank said.

Education, alcoholic beverages and tobacco rose the most in October, according to the bank. Food prices, which have the biggest weight in the consumer price index, surged 1.6 percent from 0.3 percent a month earlier, the statement said.

The government yesterday raised the price of corn flour and rice by as much as 24 percent -- the first increase since March -- in a bid to avoid food shortages.

Consumer prices have stabilized in recent months as a five- quarter contraction has seen limited industrial output and a contraction in foreign investment, Boris Segura, Latin America economist at Nomura Securities International Inc., said in a telephone interview from New York.

“The recession is doing the work,” said Segura. “If the authorities were really determined to bring down inflation, they should attack the causes and not the symptoms.”

To contact the reporter on this story: Charlie Devereux in Caracas at cdevereux3@bloomberg.net Corina Rodriguez-Pons in Caracas at crpons@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net

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