ECB reduces interest rates, help against inflation is decreasing for the Netherlands

This article was last updated on March 6, 2025

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The European Central Bank (ECB) again reduces interest. It goes from 2.75 to 2.5 percent. This happens because the falling inflation in the euro zone is well on schedule according to the central bank.

It has been the sixth interest rate reduction since last summer. Then the ECB began to lower interest rates because inflation in the euro zone seemed to be under control. The desired inflation level is 2 percent in the medium term. The falling trend continued despite the ECB’s interest rates.

Yet the new interest step is not equally good news for every country in the eurozone. Where inflation in the eurozone last month amounted to 2.4 percent, the prices in the Netherlands rose again. In a first estimate of Statistics Netherlands, inflation in February rose 3.8 percent. Belgium has an inflation of 4.4 percent with even greater price increases.

From high to low interest rates

Until June last year, the interest rate of the ECB was still at a historically high level with 4 percent. With that, the ECB tried to reduce the then high inflation due to the increased energy prices. A high interest rate inhibits the economy because it is becoming more expensive to borrow money. As a result, prices must fall. Until two and a half years ago, the ECB interest rate was negative for years to get the struggling economy going.

With the ECB interest rate fallen to 2.5 percent, euro countries such as the Netherlands with high inflation have less and less help from the Central Bank and the interest to slow down the economy as a weapon against high inflation. Usually a government would have to spend less money in order to prevent price increases, in other words: to cut back. From the spring memorandum It should become clear whether and how that would happen.