Inflation in Honduras

A short history of inflation in Honduras

The Food and Fuel Spike (2008)

Honduran inflation peaked at 14.0% in the year to August 2008, in the same global spike that struck its neighbours, and for the same reasons: a food-heavy household basket, imported fuel, and little domestic production to cushion either.

Honduras manages the lempira against the United States dollar through a crawling adjustment rather than a hard peg, which lets the currency depreciate slowly instead of in sudden steps, and depends heavily on remittances from the United States. Inflation has generally been in the mid single figures, moving with world commodity prices rather than with domestic demand.

Post-Covid Inflation (2021 to 2023)

In Honduras, prices rose fastest in July 2022, at 10.9%. The causes of the post-Covid inflation were global in nature, beginning with the lockdowns: factories and ports closed and the shipping between them fell out of sequence, so goods took longer to make and longer to arrive. Governments had spent heavily supporting household incomes through those closures, so when restrictions lifted there was money waiting to be spent and not enough on the shelves to spend it on. Then in February 2022 Russia invaded Ukraine, disrupting two of the world's largest suppliers of wheat, fertiliser, oil and gas at once, and the cost of everything grown, heated or transported rose with them.

Because the causes were shared, so was the timing: most countries peaked within a few months of one another in late 2022. The major inflation events covers this episode and the others in more detail.