Dutch central bank says inflation still "worrying," despite falling energy prices
De Nederlandsche Bank (DNB) still believes that the inflation situation in the Netherlands is "worrying," although consumer prices did not rise as rapidly in recent months as they did last year. The central bank's board member, Olaf Sleijpen, said this during a briefing in the Tweede Kamer on Wednesday.
The fact that inflation has leveled off recently is due to a fall in energy prices, which shot through the roof a year ago mainly due to the Russian invasion of Ukraine. But Sleijpen pointed out that core inflation, which excludes food and energy prices, has remained as high as ever.
As long as core inflation remains too high, the European Central Bank (ECB) will have to "take further steps," Sleijpen said. Interest rates have risen at an unprecedented pace over the past year to curb inflation. As a result, market interest rates on loans and savings have also risen.
Sleijpen cites the interest that the Netherlands pays on government bonds with a term of ten years as an example. It was still a negative rate at the end of 2021, but has now risen to 2.9 percent. That is "historically not very high," but the speed at which that increase took place is, said Sleijpen, who is the DNB's Executive Board Member of Monetary Affairs and Financial Stability.
Rising interest rates have recently caused problems for financial institutions, particularly in the United States. This also led to unrest in the financial markets in Europe, especially when the Swiss bank Credit Suisse had to be saved from collapse by means of a lightning-fast takeover by industry rival UBS.
"The good news is that the stress we've seen in the financial markets has certainly not spread broadly in the financial system," said Sleijpen. He noted that the markets are "still functioning" and have proven to be resilient.
According to DNB, the problems at Credit Suisse and the American banks were isolated and did not occur in the Netherlands. But the rapidly rising interest rates are not completely without danger for Dutch financial institutions. They earn higher interest margins, but on the other hand, customer credit risks are also increasing.
Reporting by ANP