Interest rate continues to rise

The Dutch long-term interest rate, based on the return of the latest ten-year government loan, averaged 4.7 percent in June 2008. The long-term interest rate reached the highest level in nearly six years. Last May, the long-term interest rate was 4.4 percent.

The European Central Bank (ECB) has raised its interest rates by 0.25 of a percent point. Since 9 July 2008, the ECB deposit rate has been 3.25 percent. The deposit rate is often considered as the bottom rate on the interest market. The main ECB interest rate, the repo rate, stood at 4.25 percent since 9 July 2008. Previous to this change, the ECB raised its interest rate for the last time in 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. The gap between the target figure and the actual inflation rate in the eurozone is widening. Eurostat, the statistical office of the European Union, calculated an average inflation of 4.0 percent in June 2008, an unprecedentedly high level in the eurozone. Inflation in the eurozone exceeded 2 percent for the tenth month in a row.

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