Bloomberg is reporting an odd constellation of events in Venezuela: inflation is currently around 16 percent and is expected to keep rising, but nominal interest rates in bolivars were 8.4 percent last week and have been falling. Normally, as any good student of money and banking knows, the nominal interest rate is above the inflation rate (because the market-clearing real interest rate is positive) and the two move in the same direction (to preserve the same underlying real interest rate).

How does Venezuela manage to have negative real interest rates? Later in the Bloomberg article comes this hint:

[Central bank director] Maza said he isn't concerned inflation will accelerate because Venezuela has a fixed exchange rate and government-set price limits.

Not surprisingly, the fixed exchange rate is bolstered by exchange controls: you can’t buy all the US dollars you’d like at the official rate. The black market rate is considerably higher. So part of the reason people are willing to lend bolivares at a negative real rate is that they don't have much choice: the government blocks them from lending at positive real rates in other currencies.

The falling nominal interest rate, I’m guessing, is the temporary “liquidity effect” of a massive injection of new bolivares by the central bank.