Venezuela Lifts Interest Rates to Curb Inflation
Venezuela's central bank raised interest rates on credit cards and savings deposits to reign in consumer spending and control the highest inflation rate in Latin America.
Central bankers also set new maximum rates for loans to the agricultural, industrial and tourism sectors, according to a statement published today on the bank's Web site. The measures, which apply to both public and private banks, are designed to help increase productivity to relieve widespread shortages.
“The central bank is trying to slow consumption,'' said Asdrubal Oliveros, chief economist at Caracas-based research firm Ecoanalitica. “It's also trying to stimulate lending for these productive sectors.''
Venezuela is taking steps to cool the economy after more than four years of growth fueled by record prices for oil, the country's top export. Food and manufacturing production growth haven't kept up with demand, leading to widespread shortages of food staples and contributing to higher inflation.
Venezuelan consumer prices rose 22.5 percent in 2007, above the government's target of between 10 percent and 12 percent.
Starting March 1, the maximum credit card rate will rise to 32 percent from the current 28 percent, the central bank said today in a statement pay day loans free instant credit score estimator. The minimum interest rate on savings deposits rises to 13 percent from 10 percent, the bank said.
Negative Rates
The increase in the savings rate won't be enough to encourage consumers to keep their money in the bank, as inflation is expected to accelerate this year, said Miguel Carpio, chief economist at Banco Federal CA in Caracas.
“Effectively, we still have negative interest rates,'' he said.
The central bank's board also agreed to set a maximum interest rate of 19 percent on manufacturing loans and a maximum 14 percent rate on agriculture loans.
The bank's discount rate rises to 32.5 percent from the current 28.5 percent.
Forcing banks to pay higher savings deposit rates will cut into profits, prompting them to lift interest rates in general, Oliveros said.
“All rates on personal credit are going to go up to compensate for these higher costs,'' he said.
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