Dutch inflation at a five year high

Inflation in Holland is running at a five year high as petrol prices are driving up the threat of inflation at record rate.

Annual inflation accelerated to 2.3% in May from 2% in April as this time last year, inflation was running at 1.8 percent.

In a period of low consumer confidence, Holland has one of the highest petrol prices in Europe which has had an adverse effect on disposable income and the profitability of most businesses as the Harmonized Index of Consumer Prices, has grown 2.1% year on year.

The affect of petrol prices has been so pronounced that more people in the country have switched to driving on diesel, and this in turn has created shortages.

To make the situation worse, the European Central Bank has kept interest rates at 4 percent and this inactivity and safe approach will not help the Dutch economy, nor will it help with the increased threat of inflation which is directly slowing down the economy further.

The International Monetary Fund has predicted that Dutch inflation is forecasted to accelerate to 2.4% but will drop back down to 1.8 percent by early 2009.

Holland, in comparison, is doing fairly well as inflation for the euro region increased to 3.6 percent last month which is a 16-year high.

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