Interest rate down in December

The Dutch long-term interest rate, based on the return of the latest ten-year government bonds, averaged 3.4 percent in December 2005. This is 0.1 percentage point lower than in November. In October as well as in November the long-term interest rate increased by 0.2 percentage point.

The European Central Bank (ECB) increased its interest rate by 0.25 percent point on 1 December 2005. The previous ECB rate change was in June 2003, when the ECB lowered its rate by 0.5 of a percent point. The lowest rate on the market is the ECB deposit rate, which is 1.25 percent as of December 2005. The main ECB interest rate, the repo rate, is 2.25 percent as from December 2005. A Focus article released on 1 December in the Economic Monitor pursues the relationship between the capital market interest rate and interest rate interventions by the ECB.

A major reason for the ECB to change its interest rate is the inflation rate in the eurozone. In the last couple of years inflation stayed around 2.1 percent, with a dip in February 2004 of 1.6. The inflation rate in the eurozone in November averaged 2.3 percent. This is 0.2 of a percent point down on October. According to a flash estimate issued by Eurostat, the Statistical Office of the European Communities, eurozone annual inflation is expected to be 2.2 percent in December 2005.

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