Peru and Venezuela Inflation Rises

May consumer price data shows Andean countries suffering the same problem as much of the rest of the region: inflation. According to the government statistics agency INEI, the IPM index rose 0.88% in May, versus 0.21% deflation in May 2006. Lima metropolitan area prices rose 0.49% in May, more than expected. “We believe that the high May inflation mark raises the probability that the Central Bank will increase interest rates at the next monthly monetary policy meeting, scheduled for June 7,” says Goldman Sachs. “We now assign a 60% probability that the Central Bank will raise the reference interest rate by 25bp to 4.75% on June 7,” the shop adds. It pins price hikes on rapidly expanding domestic demand. Meanwhile in Venezuela, Caracas metro area prices gained 1.73%, following a 1.41% increase in April. Goldman predicts Venezuelan inflation could well reach 20%.