Inflation remains high despite lower oil prices

In October, inflation in the Netherlands remained high, with the HICP inflation rate at 3.3%, according to Rabobank’s latest inflation monitor. Although oil prices have slightly declined, purchasing power remains under pressure due to persistently high costs of services and processed foods. For the coming years, Rabobank expects some relief in inflation, mainly due to reduced energy costs and lower production costs across various sectors.

Food and services drive inflation to 3.3%

Rising service costs continue to be the primary driver of inflation. According to Rabobank, services contributed 2.3 percentage points to the overall price increase of 3.3% in October. Alongside services, prices of food, beverages, and tobacco are also steadily rising. Earlier excise tax increases on tobacco and alcohol have amplified this effect, with inflation likely to stay elevated through mid-2025.

Wage growth climbs, yet purchasing power lags

Rabobank’s inflation monitor indicates a 6.6% increase in wages compared to September last year, but this has not yet fully offset inflation’s impact. Sectors with a significant share of minimum-wage workers, such as hospitality and cleaning, have benefited most from wage growth. However, wage progression in sectors like culture and recreation lags, partly due to the aftermath of the pandemic.

Oil prices stabilize, Middle East remains inflation risk

Rabobank anticipates that oil prices will remain around 70 dollars per barrel over the next few years. The rise of electric vehicles and LNG-powered trucks has driven down demand for oil. Nevertheless, geopolitical uncertainties in the Middle East continue to pose a risk; any escalation could push oil prices higher, directly impacting inflation. In the longer term, Rabobank expects oil prices to gradually increase above 80 dollars per barrel, which could again influence fuel prices in the Netherlands.

Rabobank.nl

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