Inflation affects us all, from your daily groceries to a cup of coffee on a terrace. At DNB, we work to keep prices stable so the economy remains predictable and healthy.
Ensuring stable inflation
For a while, prices rose far too quickly. Yet stability and predictable developments over the medium and long term are crucial for a well‑functioning economy. That is why DNB aims for a stable inflation rate of around 2%.
But how exactly do we do that? In the video below, Benten Wijnen talks to colleagues at DNB to seek answers to this question.
Internationally connected economies
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 euro area. DNB and all other national central banks in the euro area 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, trade 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.
‘Door een ingewikkeld thema als inflatie begrijpelijk te maken werken we behalve aan een sterke economie ook aan vertrouwen in de economie.’
Marco’s story
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