Inflation came in lower than analysts had expected

European inflation rates eased, but not as much as analysts had expected. “So central banks have to be proactive and demonstrate that they are prepared to resist something,” says economist Arnaud Boot.

However, the decrease does not mean that inflation is also low, he insists. ‘Inflation is working through food and other commodities, and it’s in line with expectations,’ says Boot. “We have a central bank that has set the course for rate hikes. Our interest rate is two per cent, in the US it is five per cent and Europe is lagging behind the US so interest rates will rise again.’

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So the economy is slowing down, and according to Boot, that’s the intention. “Everything is priced in, and in the meantime governments have to make sure they don’t spend all that money. Because the economy is fully occupied, they will bite their own tails. So you will see that we have to wait until the economy slows down, which is not really news.

difference

Although inflation in Europe will move towards US levels, Boot does not expect inflation to rise to that level. “The expectation is that it will increase less,” he continues. ‘America has always been the land of extremes, and that applies here too. So what I said was not news because it was completely in line with expectations.

Also Read | Inflation eased slightly and food became more expensive again

The opening continues: ‘Inflation has not only disappeared, but continues to affect people’s minds. So central banks need to be proactive and demonstrate that they are willing to resist something. Inflation is very irritating to the economy.’

Unemployment

But, says Boot, the Dutch economy could take a hit. “It’s grown like crazy for two years in a row now, more than four percentage points,” he asserts. “We have the lowest unemployment rate in the history of our country, so we have to slow down the economy.”