Dutch inflation rate steady at 2.4%, but Middle East conflict could trigger new rise

The cost of living in the Netherlands rose by 2.4 percent in February compared with a year earlier, according to preliminary figures from Statistics Netherlands. Inflation remained steady compared with January, after falling from 2.8 percent in December.

Consumer prices increased by 1 percent in February compared with January. Statistics Netherlands notes, however, that temporary seasonal effects, such as clothing sold in clearance sales, can have a large impact, and these discounts do not reflect a lasting drop in prices.

The February inflation figure predates the American‑Israeli strikes on Iran. Economists warn that if the Middle East conflict drags on, rising oil and gas prices could push inflation higher.

Statistics Netherlands preliminary inflation estimate is based on incomplete data. The official figures for February are scheduled for release on March 10.

Energy and fuel prices stayed flat in February, following a 0.3 percent increase in January. Food, drinks, and tobacco rose 1.4 percent, down from a 2 percent increase the previous month. Service sector prices increased 4.2 percent in February, up from 3.9 percent in January, while industrial goods rose 0.3 percent, compared with 0.6 percent a month earlier.

Using the European method of calculation, inflation in the Netherlands rose to 2.3 percent in February, up from 2.2 percent in January. This EU-agreed method excludes the costs of living in one’s own home, whereas the Dutch method includes them.

Philip Lane, chief economist at the European Central Bank (ECB), warned in an interview with the Financial Times that a prolonged Middle East conflict could drive eurozone inflation higher and dampen economic growth.

The conflict widened on Monday as Israel struck targets in Lebanon while Iranian forces continued strikes across the Gulf region. Energy markets reacted sharply, with oil prices rising significantly as fears of supply disruptions mounted.

“A surge in energy prices pushes up inflation, particularly in the short term, and a conflict like this would harm economic activity,” said Philip Lane. He added that the medium-term impact on inflation will depend on the scale and length of the conflict, and that the European Central Bank is keeping a close watch on developments.