De Nederlandsche Bank (DNB) has enlisted the help of the government and the business community to curb inflation. Previously, DNB called on unions to moderate wage demands and, according to macroeconomist Edin Mujagic, the new step fits well with the mantra “everything and everyone must help fight inflation”.
According to Mujagic, the DNB’s repeated calls also make it clear that the Dutch central bank is still afraid of long-term inflation. ‘Recently a stream of inflation papers and analysis has flowed from DNB,’ he explains. “And that makes sense, because everyone’s talking about inflation.”
‘A stream of inflation papers and analysis has recently come out of DNB’
However, Mujagic is under the impression that the tone used in the documents and analyzes also serves the purpose of preparing the Netherlands for more lasting inflation. “Inflation is going to stay high for a long time and the outside world needs to be prepared for that.”
‘spend less’
According to Mujagic, DNB is also trying to encourage consumers and the government to spend less. «Because the more you spend as a government, the more oil you throw on the fire of inflation. DNB therefore wants employers to watch out for price increases and unions to watch out for wage demands. And the overall goal is to reduce the demand for goods and services.’
The intention is that supply and demand are better balanced again, because otherwise inflationary pressure will not decrease, says DNB. And with that they hit the mark, according to Mujagic. “It’s really perfect,” he says. “Do an analysis and ask everyone and everything to help curb demand, while the DNB, as a central bank, can in principle do it itself without much effort.”
Why?
And so, according to Mujagic, the question arises as to why DNB uses this strategy. It may have to do with the fact that the central bank does not dare to raise interest rates, in connection with some euro countries with high debts. “But such an appeal also creates the impression that they are blaming unions and employers for high inflation,” Mujagic explains. “In reality, they insinuate that everything and everyone is to blame, except the central bank.”
Salient, because according to Mujagic it is the DNB, and therefore the ECB, that started raising rates too late. “Much later than other central banks,” he continues. “Certainly given the extent to which interest rates are being raised. Going from 0 to 3.5 percent is impressive, but it’s not enough to tackle inflation decisively.’
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.
