CARACAS (Reuters) - Venezuela's annual inflation dropped below 1 million percent in May for the first time since 2018, the opposition-run congress said on Monday, the result of the central bank restricting the domestic money supply.
Consumer prices in the 12 months ending in May rose 815,194%, the legislature said, compared with 1.3 million percent in April. Prices rose 906 percent in the first five months of year, it said.
The slowdown is the result of regulations requiring banks to keep a greater percentage of the bolivar currency in reserve, and because the central bank is issuing fewer new bolivars than in the past.
The result is that the banking system has less capacity to lend, said legislator Angel Alvarado in an interview, which will further slow an already ailing economy.
"They are slowing inflation through greater economic contraction," Alvarado said.
The figures are significantly more dire than those published by the central bank last week that showed inflation at around 130,060% in the 12 months ending in April, part of the first official economic indicators released in more than five years.
Those figures show that the economy, which went into recession in 2014, contracted 22.5% in the third quarter of 2018 with respect to the same period a year earlier.
The government of President Nicolas Maduro says Venezuela's economic problems are caused by U.S. sanctions that have crippled the OPEC member's export earnings and blocked it from borrowing from abroad.
Critics say a dysfunctional system of price and currency controls along with a wave of nationalizations of private businesses turned what was once a strong economy into a collapsing basket case.