Inflation
Can you help keep a cup of coffee affordable for everyone?
Your energy bill goes up, there are fewer things in your shopping basket, and you suddenly have to pay more for a cup of coffee in a café: inflation. Prices for almost everything are going up and up, meaning every euro in your pocketbook or bank account is worth less and less. This is troubling, because stability and predictability in the medium and long term are crucial for the proper functioning of the economy. This is why DNB aims for low and stable inflation.
ECB Governing Council
Countries’ economies are not islands. The Dutch economy is closely linked to that of other countries, and even more so to the economies of other countries in Europe and the eurozone. DNB and all other national central banks in the eurozone sit on the Governing Council of the European Central Bank, where they discuss economic and monetary developments and related policies every six weeks. The decisions made there often have a direct impact on the Netherlands.
Influencing inflation means influencing the economy
If everything becomes more expensive, unions will push for higher wages in their negotiations to restore purchasing power. Pension funds will want the benefits they pay to rise too. And the government may decide to provide financial support to households. However, all that extra money in circulation – and thus additional demand – can cause prices to rise even more. Raising interest rates is one way to counteract this trend by making it more interesting to save money. As a result, people and businesses spend less and demand drops. Prices then rise less sharply, which in turn brings inflation down. This is what we do to keep a cup of coffee affordable for everyone.
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