(Bloomberg) -- Just days after the International Monetary Fund issued an eye-catching forecast -- inflation of 1,000,000 percent in Venezuela this year -- the data on the ground suggests that even that number may turn out to be too low.
The price of a cup of coffee measured in Bloomberg’s Cafe Con Leche Index soared to 2,000,000 bolivars this week from 1,400,000 bolivars the week before. Back in late April, the price was 190,000 bolivars. That three-month increase equates to an annualized rate of 1,227,638 percent. (The trailing 12-month inflation rate, while still wildly out of control, comes in much lower for now: 86,857 percent.)
In its report this week, the IMF compared Venezuela’s economic crisis to some of the worst in history, including that of Germany in the 1920s and Zimbabwe a decade ago.
In Venezuela, hyperinflation took root over the past year or so, sinking the population deeper into poverty, as President Nicolas Maduro stepped up his government’s frantic money-printing policies. He has, for instance, raised the country’s minimum wage four times this year. Yet at about 5 million bolivars a month, it doesn’t even buy three cups of coffee.
Unwilling to implement tough measures to stabilize the economy -- like reducing heavy fuel subsidies -- the administration has been resorting to policies that essentially just seek to paper over the problem. The latest plan is to roll out a new currency that will lop off zeros from the bills in circulation now. The new money was scheduled to hit the street in early August and eliminate three zeros. But Maduro announced late Wednesday that the release would be delayed a couple weeks and that five zeros, instead of three, would be dropped.
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