Zimbabwe-Style Monetary Policy Begins

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Venezuela's headline inflation rate continued its decline in March, falling to 28.5% y-o-y from a peak of 36.0% y-o-y in September 2008. While we do not dispute the widespread deflationary forces at play in the Venezuelan economy as a result of falling private consumption, we believe that the government's use of monetary policy to fund its fiscal agenda will drive prices significantly higher over H209.