Interest rate up further

03/06/2008 15:00

The Dutch long-term interest rate, based on the return of the latest ten-year government loan, averaged 4.4 percent in May, 0.2 of a percentage point higher than in April this year. It was the second increase in a row. In June last year, the long-term interest rate reached the highest level in nearly half a decade, at 4.6 percent.

The European Central Bank (ECB) raised its interest rate 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 2007.

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 if the inflation rate varies around 2 percent. Since November 2007, inflation in the eurozone has been hovering around over 3 percent. Eurostat, the statistical office of the European Union, calculated that inflation in the eurozone averaged 3.6 percent in May.

Capital market interest rate (latest ten-year government bond)

Capital market interest rate (latest ten-year government bond)