Inflation has recently increased more in the Netherlands than in other EU countries. A quick estimate from the Central Statistics Office (CBS) shows that prices increased by an average of 8% in February, while in France it was 7.2% and in Spain “only” 5.5%, ad example. “Maybe it’s semantics, but wage increases are really driving prices up here,” thinks BNR in-house economist Han de Jong.
Wage-price spiral
According to De Jong, rising wages can be identified as the culprit for the sharp price increases. “They’re speeding things up a bit at the moment,” he says. However, CBS chief economist Peter Hein van Mulligen thinks, looking at the new figures, that it is not a wage-price spiral. But De Jong thinks differently: “The 7% increase in salary is a lot”.
Prices rose on all fronts in February except in the energy sector. They just fell again. ‘What you see is that last year’s high energy prices are reflected in other prices with a lag. As a result, you can see it increase across the board,’ explains De Jong. “Usually it’s six months late, but obviously there’s no guarantee it will be like this again.”
“They let the inflation genie out of the bottle.”
Energy prices peaked around September of last year but have been falling ever since. This should mean that inflation should start declining structurally from this point, ie in March. “Hopefully things move in the right direction soon.”
Interest on the rise
Furthermore, the European Central Bank (ECB) is no longer standing by. In exactly two weeks, the bank wants to raise the actuarial interest rate by half a percentage point, to 3%. “In my opinion, they came too late,” says De Jong. “They let the inflation genie out of the bottle and now they have to put it back.”
Raising the actuarial interest rate often has a significant and unpredictable slowdown in the economy and inflation. ‘If interest rates continue to rise, there is a possibility that we will end up in a bad recession,’ thinks De Jong. “If they start raising interest rates in March, it looks to me like the pace will slow down after that. It remains a difficult decision that they face.’
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.
