The fight against inflation should involve more parties than just the central bank. Olaf Sleijpen, director of monetary affairs and financial stability at De Nederlandsche Bank (DNB) told BNR. The ECB can easily reduce inflation by raising interest rates. But in the end it’s much better for the economy if everyone does their part.”
“It’s more efficient if employers, employees and the government contribute together to the central bank,” says Sleijpen. The DNB today presented new economic forecasts for the Netherlands.
Corporate profits
The central bank expects inflation in the Netherlands to fall more slowly than in other European countries. One reason is that companies try to maintain their profit margins, which incurs a lot of additional costs. At the end of last year, according to DNB, corporate profits were even the main driver of inflation.
DNB chief Klaas Knot has previously called on unions to take it easy on wage demands. Between 5 and 7 percent is possible, but not much more. The DNB now also invites employers to look at profit growth. “Use the profits to pay the salary increase. In other words, do not try coûte que coûte to maintain the profit margin, for example by raising prices. Then your profit will be a little lower, but that’s okay too since you’re making good profits.’
Sense of responsibility
In doing so, De Nederlandsche Bank appeals to the sense of responsibility of both employers and employees. ‘You don’t want to end up in a situation where wages and prices are being raised one after another. We’re not there yet, but I don’t think we should even get into that.’ Sleijpen warns against a ‘model of social conflict’, ‘we have never benefited from’.
This does not mean that the Dutch central bank does not understand the demand of employees and the position of employers. “I just think that we, as a Dutch central bank, should look at the bigger picture and have a responsibility to emphasize that we have to solve it together.”
Too big a shortage
And with that, the DNB also assigns tasks to the government, which has to draw up a targeted plan to fight poverty, for example. «The public deficit is, according to our estimates, slightly below 3 percent. The debt is well below 60%. But this shortage is actually quite high,’ thinks Sleijpen. ‘The government continues to contribute to economic growth and therefore also to inflationary pressures. But with a shortage like this, it’s even harder for us to absorb a shock or a real setback.’
Due to the corona crisis, the buffers have been “a bit exhausted”, says Sleijpen, who would like to see the extra government expenditure adequately covered. “Don’t write bad checks on that million dollar bill. In any case, this seems to us to be a very important first step in the short term.’
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.
