Dutch inflation rises to 3.3% in October as goods prices rise, food deflation eases
Lead — The recent uptick in Dutch inflation to 3.3% in October marks a notable recovery from September's 3.0%, driven predominantly by non-energy goods and easing food deflation. Per the full note from ing-think, energy price inflation remains a factor, but it was not the primary driver behind this rise. This shift in inflation dynamics may have implications for the ECB's assessment of rate policy and the euro's exchange rate performance, particularly as households face higher energy costs ahead.
What the desk is arguing
The desk frames this as a significant inflationary shift in the Dutch economy, with headline inflation rising partly due to stronger pricing in non-energy goods. Per the commentary, core inflation climbed to 3.0%, boosted by non-energy goods inflation that saw an uptick to 1.9% year-on-year, indicating a more persistent inflationary environment.
The impact of food prices, which still reflect deflation but at a reduced rate, suggests a complex recovery in consumer pricing. Today's figures show food deflation easing from -1.2% to -0.6%, which may signal a future stabilization or rise in consumer price expectations as global agricultural pressures mount.
Where it sits in our coverage
Given that our consensus target for the EUR/USD reflects broader currency dynamics, the target is set at 1.075, with a range from 1.04 to 1.12. The following firms provide distinct targets for December 2026: - jpmorgan (target: 1.10) - bofa (target: 1.04)
The desk's assessment aligns with jpmorgan, as it rests in the higher range of current expectations, while bofa holds a more conservative stance. This divergence reflects a cautious outlook on European recovery amidst ongoing inflation concerns.
How other firms see it
Analysts at jpmorgan and deutsche bank see this inflation rise as a long-term concern, advocating positions that reflect ongoing inflationary pressures. In contrast, bofa takes a more pessimistic view, anticipating a return to lower inflation rates over the coming months, thus supporting their bearish EUR/USD forecast.
Consider monitoring the implications of the European Central Bank's policy direction, particularly in relation to interest rates and inflation adjustments. The EUR/USD trajectory will closely follow these developments as the market calibrates its expectations of future ECB actions, especially as energy costs evolve.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Dutch inflation rises to 3.3% due to non-energy goods
- 02Easing of food deflation signals potential pricing recovery
- 03Core inflation increase indicates persistent inflationary pressures
- 04Expect higher energy costs to influence upcoming inflation data
Market implications
With the euro currently trading around 1.075, any further increases in inflation may reinforce bullish positioning for the EUR/USD. Market participants should watch for ECB commentary regarding inflation management as households renew energy contracts at higher prices.
Risks to this view
A substantial easing in inflation metrics or a sharp decline in energy prices could undermine the current bullish sentiment on the euro. A shift towards more dovish ECB rhetoric in response to these factors would similarly alter the outlook for EUR/USD.
Older quick take Quick take Published 08:15 The Netherlands Translate Dutch inflation rises to 3.3% in October as goods prices rise, food deflation eases Headline inflation in the Netherlands rose to 3.3% year-on-year in October from 3.0% in September. Energy was not the main culprit, with price growth edging up only slightly. Instead, stronger non-energy goods inflation and easing deflation in food, alcohol and tobacco drove the acceleration Food prices are still falling in the Netherlands but not as much as before According to today’s preliminary HICP figures, the acceleration in headline inflation in October was far from just an energy story.
Core inflation, which in this measure excludes energy, food, alcohol and tobacco, increased slightly to 3.0% in October from 2.9% in September thanks to non-energy industrial goods. Inflation in this segment rose to 1.9% year-on-year from 1.5% in September, lifting its contribution to headline inflation by 0.1 percentage point to 0.5 percentage points. The acceleration in the headline figure was mainly driven by food, alcohol and tobacco.
Prices in these categories were still lower than a year earlier, but deflation eased to -0.6% in October from -1.2% in September. The shift mainly reflected processed food, where deflation eased to -0.6% from -1.3%. This means that food continued to drag on headline inflation, but by less than before.
Looking ahead, food is likely to push inflation up rather than hold it down. Higher energy and fertiliser costs, alongside rising global wholesale prices for grains and oils, will eventually feed through to the prices that Dutch consumers pay. Energy inflation, including motor fuels, edged up to 14.5% year-on-year in October from 14.0% in September, contributing around one percentage point to headline inflation.
We expect this contribution to increase over the coming months as more households renew their energy contracts at higher prices. Services inflation eased to 3.7% from 3.8%, in line with the deceleration in wage growth. However, it remained the largest source of inflation, contributing around 1.7 percentage points.
Looking ahead, we expect Dutch inflation to rise further, slowing consumption growth. Selling price expectations eased slightly in October but still point to above-normal inflation. The delayed impact of higher energy prices and expected increases in food prices will keep upward pressure on inflation.
We expect headline HICP inflation to peak in the first quarter of 2027, potentially approaching 4%. The Netherlands Services inflation Inflation Food inflation Energy prices Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument.
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