EU country warns of persistent economic risks

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The Netherlands’ central bank, De Nederlandsche Bank (DNB), warned on Monday that inflation will continue high due to slowing economic development.

After peaking at 11.6% last year, Dutch inflation is forecast to fall to 4.2% this year, 3.7% next year, and 2.5% by 2025, according to the bank’s research.

Despite the drop from double digits, DNB noted that inflation in the country remained too high, blaming the trend on slower economic growth. According to the regulator, following this year’s standstill, Dutch GDP will rise marginally to 1.3% next year and 1.1% in 2025.

It highlighted the pattern as concerning, considering the European Central Bank’s (ECB) efforts to limit Eurozone consumer price rise to 2%.

“If Eurozone inflation falls but remains relatively high in the Netherlands, lowering inflation in the Netherlands will become even more difficult,” the central bank added.

According to the DNB, core inflation, which excludes energy and food prices, has been more tenacious than anticipated and is now higher than headline inflation. Core inflation in the Netherlands is anticipated to be 6.8% this year, 3.6% next year, and 2.8% only in 2028, according to the report.

The regulator urged firms and labour unions to be more conservative in raising pay and prices. The Dutch central bank urged businesses to maintain controlled increases in profits and wages in order “to prevent the economic adjustment process from leading to a leapfrog dynamic that further exacerbates inflation.”