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CARACAS, June 9 (Reuters) - Venezuela posted a large jump in May inflation on rising food costs, a blow to the economy ahead of key elections after moves to slow Latin America’s fastest rise in consumer prices slowed growth this year.
The central bank said on Monday soaring global food costs and looser price controls by the socialist government of President Hugo Chavez had driven food and non-alcoholic beverage prices up a startling 6.1 percent in the month.
“In this period, we have been adjusting some prices that were regulated in categories that influence the price index,” Planning Minister Haiman El Troudi said, adding that a 30 percent hike to public sector and minimum wages last month also made an impact.
The sharp rise is particularly painful for the government since anti-inflationary efforts, including slower spending, dragged the OPEC member nation’s growth rate down to 4.8 percent in the first quarter of this year from 8.8 percent in the same period in 2007.
In the midst of an oil boom, import-dependent Venezuela has struggled to keep a lid on inflation despite subsidizing gasoline and food for the poor as well as imposing price caps on many basic items.
El Troudi said the government would on Wednesday announce a package of economic measures, including an agreement between business, consumers and the state aimed at slowing price rises.
Domestic production has not kept up with consumer demand in Venezuela. The oil-strengthened bolivar currency makes imports relatively cheap, but imported foods have this year grown more expensive.
The government relaxed controls on goods such as beef, chicken and pre-cooked corn flour — a staple of the Venezuelan diet — after farmers said the regulations were to blame for sporadic shortages of basic products that hit Chavez’s popularity.
“Despite the price problems and international food scarcity, the supply of food and other goods has substantially improved all over the country,” the bank said in a statement, adding that without food, inflation rose 1.9 percent.
A push to sop up excess money supply had cut inflation to 1.7 percent in both March and April as Economy Minister Rafael Isea, who is set to leave his post, sought to bring annual inflation below the 2007 increase of 22.5 percent.
Year-to-date inflation is now 12.4 percent, making it unlikely the government will keep inflation below its 2008 target of about 19 percent.
Core inflation, which excludes goods regulated by price controls, was 2.6 percent for May. Prices for goods in general rose by 4.1 percent, more than twice as fast as the 2.0 percent increase in the cost of services.
The price jump comes despite Venezuela’s efforts to curb liquidity growth by hiking interest rates and slowing government spending increases, as well as less conventional methods like selling bonds to soak up excess bolivars.
“Inflation remains the main macro issue facing the country but unfortunately we do not expect the government to embrace conventional macro policies (tighter fiscal and monetary policies) to get a solid grip on the entrenched inflation dynamics,” said Alberto Ramos, senior economist at Goldman Sachs. (Reporting by Brian Ellsworth and Deisy Buitrago; Writing by Frank Jack Daniel; editing by Gary Crosse)