Why Dutch inflation is higher than euro area inflation

Monetary policy

The primary objective of the European Central Bank (ECB) is to maintain price stability in the euro area. That means an average inflation rate of 2% over the medium term, in other words about two to three years. In its meeting of 30 October, the ECB's Governing Council decided not to adjust interest rates because inflation in the euro area is currently around the 2% target rate and the central bank expects it to remain there for the foreseeable future. Keeping interest rates at current levels will help ensure that inflation remains close to target over the medium term. However, future inflation developments are surrounded by a great degree of uncertainty. Indeed, there are substantial upside and downside inflation risks stemming from geopolitical tensions, a stronger euro exchange rate, trade frictions, fragmentation of global supply chains and other factors. More information will follow in the December projections, including the outlook for inflation. The ECB will use this information to reassess interest rates at that time.

Inflation differential in the Netherlands

As mentioned, the ECB focuses on average inflation in the euro area. Inflation may be higher or lower in individual euro area countries. Dutch inflation has been higher than in the euro area as a whole for several years. The inflation differential narrowed gradually starting in April of this year, but it has widened again over the past two months. In October, Dutch inflation was 0.9 percentage points higher than the euro area average.

The figure below shows the difference between inflation in the Netherlands and in the euro area. The green line indicates the total differential and the vertical bars indicate the difference in the contribution of the main components. The figure shows that the inflation differential peaked in April of this year. This was mainly because prices of food, services and goods rose more sharply in the Netherlands than in other euro area countries. 

Figure Breakdown of inflation differential between the Netherlands and the euro area

For each component, the vertical bars show the difference in contribution to inflation (in percentage points) between the Netherlands and the euro area. Sources: Statistics Netherlands and Eurostat.

The difference between Dutch food inflation and euro area food inflation has narrowed since April of this year. The difference in energy inflation has actually widened since the spring, and the difference in services inflation widened again in October. In itself, it is not surprising that month-on-month inflation may diverge between euro area countries, for instance because of different compositions of consumption baskets or uneven economic development.

Why food inflation is higher in the Netherlands

Food, beverage and tobacco prices rose faster in the Netherlands than in the euro area, particularly in 2024 and the first half of 2025. This was largely caused by increases in indirect taxes (e.g. excise duties) in the Netherlands. Tax measures like these raise the price level once and drop out of the inflation figures a year later. This is why the difference in food inflation between the Netherlands and the euro area narrowed again starting in June of this year.

Why the price of services is rising more in the Netherlands

The price of services is largely driven by wage costs. Wage growth in the Netherlands has been higher than in the euro area for several years due to tightness on the Dutch labour market. According to the latest figures, the unemployment rate is 3.9% in the Netherlands against 6.3% in the euro area, making it more difficult to find staff in the Netherlands and resulting in higher wage growth. This has caused the price of services in the Netherlands to rise faster than in other euro area countries in recent years. Last month, services inflation was the largest contributor to the inflation differential.

Why goods inflation differs in the Netherlands

Industrial goods inflation excluding energy was higher in the Netherlands than in the euro area between February and September 2025. Looking at specific goods reveals that inflation on clothing was higher in August and September, for example. Higher wage growth likely also plays a role here: because Dutch households have more to spend, their demand for goods is higher. In addition, inflation on home-related goods (furniture, fittings and maintenance materials) was also higher in the Netherlands in September. House prices are rising faster in the Netherlands than in other euro area countries and the number of housing transactions is on the rise. When more people buy a house, the demand for furnishings and maintenance materials increases.

Why energy prices are rising more

The energy component has contributed strongly to the inflation differential between the Netherlands and the euro area in recent months. One reason for this is that the energy mix varies from country to country. Dutch households consume relatively more natural gas as part of their total consumption basket, while households in the euro area consume relatively more fuel for transport. Although oil and gas prices are set on the global market and have shown similar trends recently, they affect consumer prices in euro area countries differently. Oil and gas prices peaked in January and June of this year, after which they fell again. These changes are quickly noticeable at the petrol station, but not directly on household energy bills. One of the main reasons for this is that Dutch households are more likely to have fixed energy contracts compared to households in many other euro area countries (ACER, 2025). As a result, Dutch households are less likely to see the recent fall in gas prices reflected in their energy bills; energy inflation will remain higher for them for longer.

Policy to address inflation differential

The inflation differential is therefore linked to certain characteristics of the Dutch economy, such as its dependence on natural gas and an economy running at full capacity coupled with a tight labour market. We explained this previously in this analysis. Removing bottlenecks for businesses, such as an overfull power grid or other infrastructure bottlenecks, can help resolve economic factors that boost inflation while also encouraging firms to expand production. The resulting greater supply of goods and services would then reduce upward pressure on inflation. The same can be achieved by creating space in the labour market, for example by implementing new technologies, investing in employee skills and taking a smarter approach to organising work processes. See also this analysis.

Finally, the central government should, of course, also consider fiscal measures. Expansive fiscal policies encourage government spending. In an economy already running at full capacity such as in the Netherlands, greater public spending only creates more tightness, resulting in upward price pressure. Policymakers should therefore work to ensure sound public finances, in line with the recommendations of the Fiscal Space Working Group.