Dutch central bank economist more confident that inflation will eventually drop to 2%

The Dutch inflation will likely end up at just below 3 percent during this year. With that, the prices in the country will continue to rise harder than in other European countries. However, the leading economist for De Nederlandsche Bank, Olaf Sleijpen, is “slightly more confident” that inflation in the Netherlands will drop to the target of 2 percent.

The central bank had previously warned that the Netherlands should expect higher inflation than the rates in the eurozone. This is also due to the fact that the salary growth in the Netherlands is declining more slowly than in other countries. The decision to further reverse the reduced fuel excise duty in 2022 also plays a part in this.

There is always a risk that strong wage increases will cause inflation to rise. However, Sleijpen is not concerned about this at the moment. “The labor market is still tight, and this is a reflection of that,” he said during the presentation of the DNB’s spring forecast. “You see that wage growth is really slowing down."

DNB is also seeing that the tensions in the labor market are dissipating, and unemployment will likely rise from 3.7 percent last year to 4.4 percent in 2026 and 2027. according to Sleijpen, the unemployment rate will remain at a relatively low level.

It cannot be seen in the forecast when the inflation rate will hit 2 percent. DNB is predicting a 3 percent inflation rate in all of 2025 and 2.6 percent inflation in 2026 and 2027. There are no projections for the years that follow this.

The decrease in inflation is partly due to the cooling economy, lower energy prices, and the rise in the value of the euro, which makes imports cheaper. Previous tax increases are also now moving out of the inflation figure. According to the central bank, that is also favorable.

The DNB did use the freeze of social rents in their calculations. Now that the legislative proposal was withdrawn this week, inflation will likely be slightly higher. According to Sleijpen, it will likely be 0.2 or 0.3 percent higher this year. But he does not think that this changes the big picture of a slowly dropping inflation.