The European inflation rate has fallen, but not as much as analysts had hoped. “Central banks therefore need to be active and demonstrate that they are ready to go against something,” says economist Arnoud Boot.
However, a decrease does not mean inflation is also low, he points out. “Inflation is affecting food and other products, and that’s all in line with expectations,” says Boot. “We have a central bank that has paved the way for rate hikes. Our interest rate is about two percent, in the United States it is about five percent, and as Europe lags behind the United States, interest rates will also rise again.
The economy is therefore slowing down, and according to Boot this is also the intention. “Everything is priced in and in the meantime governments need to make sure that not everyone is spending money. They would bite their tails, especially as the economy is fully occupied. And so you’ll see that we have to wait for the economy to slow down, and that’s not really new.’
Difference
Although inflation in Europe will approach the US level, Boot doesn’t expect inflation to get that high. “The expectation is that it will increase less,” he continues. ‘The United States is of course always the land of extremes, and that is true here as well. So what I just said is nothing new, because it was completely in line with expectations.’
Boot continues: ‘Inflation doesn’t just disappear, it continues to affect people’s minds. Central banks therefore need to be active and demonstrate that they are ready to go against something. Inflation is extremely annoying to the economy.’
Unemployment
But, says Boot, the Dutch economy can take a hit. “It’s grown like crazy for two years in a row now, more than four percentage points,” she points out. “We have the lowest unemployment rate in our country’s history, so we just need to slow down the economy.”
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
