The Daily Journal.— Venezuela continues to record the world’s highest inflation rate in 2026, and according to economist Manuel Sutherland, the expansion of the monetary base represents one of the main factors driving the acceleration in prices.
In his latest analysis, Sutherland estimates that Venezuela’s year-on-year inflation reached 576% between July 2025 and July 2026, far above the International Monetary Fund’s (IMF) average annual projection of 387%. The economist notes that Venezuela therefore continues to have, by a wide margin, the highest inflation rate among the world’s economies.
The university professor argues that external factors cannot primarily explain the country’s inflationary dynamics and instead attributes a central role to domestic monetary policy. “The cause of inflation is fundamentally endogenous,” he said.
According to his calculations, between December 2025 and July 2026, the National Consumer Price Index (INPC) rose by approximately 175%, while the monetary base expanded by around 125%.
The economist notes that cumulative inflation outpaced the growth of the monetary base, a trend that, in his view, also reflects an increase in the velocity of money. As the bolivar loses value, economic agents seek to get rid of the currency and shift their resources into foreign currencies, goods and services.
“People prefer to hoard foreign currency and quickly get rid of ‘bad’ money,” Sutherland said, linking this behavior to declining confidence in the bolivar and expectations that monetary expansion will continue.
Monthly inflation reaches 19.9%
The analysis places particular emphasis on July’s figures. Monthly inflation reached 19.9%, while the monetary base grew by 4.3%. Sutherland attributes the gap to possible lagged effects from previous monetary issuance, supply-side factors and a potential deterioration in expectations during the month.
Although the relationship between the two variables does not move in perfect sync from month to month, the economist finds a strong correlation during the January-July period.
Based on these results, Sutherland concludes that the monetary base remains the main driver of price levels during the period under review. He warns that any stabilization program will have limited effects unless it controls monetary expansion in a “credible and sustained” manner.
The economist also argues that the government has little room to finance public spending through monetary issuance because prices react almost proportionally to increases in liquidity. He also notes that expectations remain weakly anchored and that the problem extends beyond the amount of money in circulation to the country’s broader monetary regime.
