The Dutch long-term interest rate, based on the return of the latest ten-year government loans, averaged 4.3 percent in December, 0.1 of a percentage point up on November. In June last year, the long-term interest rate reached its highest level in almost five years.
The European Central Bank (ECB) has raised its interest rates by 0.25 of a percentage point eight times in the space of eighteen months. Since 13 June 2007, the ECB deposit rate has been 3.0 percent. The deposit rate is often considered as the bottom rate on the interest market. The main ECB interest rate, the repo rate, has been 4.0 percent since 13 June.
One of the main guidelines for the ECB’s decision to change or refrain from changing the interest rate is the inflation level in the eurozone. According to the ECB, prices are stable in the eurozone when the inflation rate varies around 2 percent. Eurostat, the statistical office of the European Union, calculated that inflation averaged 3.1 percent in December. In March 2007 eurozone inflation was 2.0 percent, and it had dropped to 1.7 percent in August. Since then the inflation rate has increased steadily.
Capital market interest rate (latest ten-year government bond)