The fact that inflation has stabilized recently is due to the decline in energy prices, which peaked just a year ago under the influence of the Russian invasion of Ukraine. But Sleijpen points out that core inflation, which excludes food and energy prices, remains as high as ever.
interest rate increase
As long as core inflation remains too high, the European Central Bank (ECB) will have to take further steps, according to Sleijpen. Interest rates have risen at an unprecedented rate over the past year to curb inflation. As a result, market interest rates on loans and savings have also increased.
Sleijpen cites as an example the interest that the Netherlands pays on government bonds with a ten-year term. It was still negative at the end of 2021, but has now risen to 2.9%. According to the director of the DNB, this is “historically not very high”, but the rate at which this increase has occurred is.
Credit Suisse
Rising interest rates have recently caused problems for financial institutions, particularly in the United States. This also led to turmoil in the financial markets in Europe, especially when Switzerland’s Credit Suisse had to be saved from collapse by a lightning takeover by industry peer UBS.
“The good news is that the stress we’ve seen in the financial markets has certainly not spread widely across the financial system,” said Sleijpen. She notes that markets “still work” and have therefore proven resilient.
According to DNB, the problems at Credit Suisse and the US banks were isolated and do not occur in the Netherlands. But rapidly rising interest rates are not entirely without dangers for Dutch financial institutions. They earn higher interest margins, but on the other hand, customers’ credit risks also increase.