Higher rents, pricier tobacco behind rising inflation in July

Daily life has become 3.7 percent more expensive than in the same month a year earlier. Statistics Netherlands (CBS) reported this based on definitive numbers equal to the previously reported rapid estimate. Inflation was also higher than in previous months. The costs of daily life rose by 3.2 percent in June and 2.7 percent in May.

The rise of inflation has mainly come from the development of housing rents. Based on temporary numbers, the housing rents were 5.5 percent higher on average in July 2024 compared to a year earlier, according to CBS. The average annual rent increase was two percent in July 2023. In addition, the higher prices of tobacco also played a part in the inflation.

Price developments of motor fuels had a lowering effect on inflation. Motor fuels were 1.5 percent more expensive in July than in the same month last year. In June, motor fuel prices were over 10 percent higher than a year before.

The Dutch inflation based on the European calculation method was 3.5 percent in July, compared to 3.4 percent in June. This calculation method is a little different from the one adopted by CBS. The method agreed upon within the European Union to measure inflation does not take into account the costs of living in one's own home. Inflation in the Netherlands is, therefore, above the average of the eurozone. Inflation in the eurozone increased from 2.5 percent in June to 2.6 percent in July.

A goal of two percent inflation was set by the European Central Bank (ECB). Since halfway through 2021, the inflation in the euro area has been above that level every month. The central bank in Frankfurt took another interest-rate pause in July after cutting interest rates for the first time in years in June. With the interest-rate pause, the ECB wants to gain more time to ensure that inflation cools further before cutting interest rates again.

ECB president Christine Lagarde said the future economic numbers depend on whether interest rates can drop again in the next meeting. The financial markets hope the ECB will announce another reduction in September.