Inflation in the Netherlands falls more than expected
Headline inflation in the Netherlands fell more than expected in June, decreasing from 3.4% YoY in May to 2.5%, driven primarily by declining energy prices and a broad deceleration in service inflation. Per the full note from ING, the easing of inflation pressure could create favorable conditions for policy discussions, although the Bank's path remains influenced by wage growth dynamics. This unexpected drop may see positioning shifts ahead of broader Eurozone developments, although there are no immediate high-impact events on the calendar for this region.
What the desk is arguing
The significant decrease in inflationary pressures in the Netherlands provides an unexpected boost to the economic outlook, potentially signaling a shift in monetary policy dialogue. Per the full note from ING, the drop to 2.5% is not just a reaction to lower oil prices, but indicates a more comprehensive pullback in inflation trends, particularly in the service sector where rates fell to 3.9%.
Moreover, the downturn in core inflation to 2.7% YoY from 3.4% in May suggests that underlying inflationary pressures may be subsiding faster than anticipated. This trend could factor into future discussions at the European Central Bank, as policymakers gauge the inflation trajectory against wage growth forecasts and broader economic indicators.
Where it sits in our coverage
Our consensus target for the EUR/USD is currently set at 1.075, with a range between 1.04 and 1.12. Specific firm estimates include: - jpmorgan: 1.10, March 2026 - bofa: 1.04, March 2026
This current interpretation of the Dutch inflation data suggests the desk's call aligns closely with the upper end of the prevailing target range, particularly reflecting jpmorgan's outlook.
How other firms see it
Several analysts are aligned with our view on the potential for muted inflation pressures leading to rate adjustments, including jpmorgan and bofa. In contrast, firms like deutsche have issued less optimistic projections regarding the persistence of inflationary trends.
Watch the EUR/USD closely as movements reflect broader monetary policy expectations. Also, keep an eye on eurozone economic indicators to assess how the region may respond to shifts in inflation data, particularly as they relate to central bank policy adjustments.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Dutch inflation plunged to 2.5% in June, exceeding expectations, with broad deceleration observed.
- 02Core inflation also fell to 2.7% YoY, indicating subsiding inflation pressures.
- 03Expectations may shift regarding ECB policy as wages and inflation trends evolve.
- 04Overall economic sentiment may pivot based on upcoming indicators and labor cost dynamics.
Market implications
Focus on the EUR/USD as it reacts to changing inflation perceptions within the Eurozone. The recent data could signal positioning shifts that favor a stronger euro if trends hold.
Risks to this view
Risks to this outlook include an unexpected rise in wage growth, which could counteract the easing of inflationary pressures, along with potential geopolitical developments affecting energy prices.
Older quick take Quick take 09:54 The Netherlands Inflation in the Netherlands falls more than expected Headline inflation in the Netherlands fell considerably, and more than expected, from 3.4% YoY in May to 2.5% in June. Not only did lower oil prices bring down fuel prices, food and especially service inflation fell considerably too. Still, we expect inflation to move unevenly month by month for now, before falling more persistently next year Food inflation has fallen in The Netherlands Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Marcel Klok Senior Economist, Netherlands The harmonised HICP inflation rate in the Netherlands in June showed both the continuation of ongoing downward inflationary trends before the energy price spike, as well as some relief from the situation in the Gulf region.
Core inflation also appeared much more benign, falling to 2.7%YoY in June (down from 3.4% in May). While inflation in the category of energy and fuel decelerated as anticipated, from 9.8% in May to 6.1% in June on the back of lower crude oil prices, it was surprising how broad the deceleration was. Service inflation fell significantly, from 5.2% in May to 3.9% in June.
It peaked in May, in part due to the timing of holidays. No detailed information is yet available, but prices of passenger transportation, package holidays and possibly accommodation, which can show considerable volatility, are the likely candidates for easing among services. This fall in service inflation puts the Netherlands back on the trend of the last half year during which service inflation was decelerating with the help of falling wage growth.
While we expect wage growth to fall further during the course of 2026, discretionary increases in the youth minimum wage in January 2027 and possible union requests for compensation for temporarily higher headline inflation in 2026 might hinder the deceleration of labour costs next year. Food, beverages, alcohol, and tobacco inflation was also a cause for deceleration, as it fell from an already low 0.4% in May to 0.0% in June. So, these prices are back at the level of one year ago.
Based on the trend in previous months, it seems that there was even deflation for many food items, such as sugar, dairy, oils, vegetables, fish and seafood. It appears now that this trend might continue for a while longer than we initially expected, as the latest reading of food producer prices, which tend to lead consumer food prices, came in even more negative than the months before. Looking some months ahead, survey data on selling price expectations from surveys conducted by the European Commission in June suggest further easing of price pressure, especially in but not limited to construction and industry.
With more subdued oil and fuel prices since developments towards a deal between the US and Iran, inflation generally seems to be becoming more contained. But because the way for prices for expiring consumer energy contracts is still up and also because other consumer items might still see the lagged effect of the earlier energy price peak and uncertainty around the US-Iran deal remains, imminent drops in the headline HICP inflation rate to 2% are yet too much to ask for the remainder of this year. We would also not be surprised to see a wobbly monthly inflation profile for the rest of 2026, with only a more persistent path down next year.
Services inflation Netherlands Inflation Food prices 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. Read more Older quick take
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