Klaas Knot: Speech at meeting with Standing Parliamentary Committee for Finance

Introductory remarks by Mr Klaas Knot, President of the Netherlands Bank, at a meeting with members of the Standing Parliamentary Committee for Finance, The Hague, 24 November 2022.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Central bank speech  | 
24 November 2022

We are coming out of a lengthy period of low inflation. Between 2011 and mid-2021, euro area inflation averaged 1.2%, which is below the ECB's price stability target of 2%. The ECB's monetary policy was therefore very accommodative for a long time, with the additional aim of preventing self-reinforcing effects via falling inflation expectations and deflation.

Inflation subsequently rose sharply for various reasons. Starting in the first half of 2021, COVID-19 lockdowns led to shortages of manufacturing resources such as computer chips along with higher costs for container transport. This resulted in price hikes that also hit consumers directly starting in the summer of 2021. Energy prices began to rise in late 2021. Inflation was boosted further when the economy reopened in early 2022, with demand for goods and especially services recovering strongly and outpacing supply. Russia's invasion of Ukraine then caused natural gas prices in Europe to skyrocket and food prices to soar. These factors came in rapid succession and persisted for longer than anticipated. Consequently, inflation has now been high for longer and has gradually spread from energy to food, industrial goods and services.

Inflation in the Netherlands has now reached 16.8% (in the euro area: 10.6%) in October. The price increases of energy and food are the most remarkable. More than two thirds of harmonised HICP inflation can be ascribed to energy and food. Expressed in percentages: of the 16.8% HICP inflation in the Netherlands, almost 12 percentage points are accounted for by energy (9.7 points) and food (2.2 points).