Last year’s high inflation was mainly due to increased wages. Companies that achieved high profits also contributed to the rising prices, but their share decreased towards the end of the year. This is the conclusion of De Nederlandsche Bank. “Wage growth gave the decline in inflation a longer tail,” says Aggie van Huisseling, economist at ABN Amro.
Aggie van Huisseling, economist at ABN-Amro: ‘Wage growth fueled inflation’
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De Nederlandsche Bank looked at who contributed most to last year’s domestic inflation. The research shows that increased wages and high net profits in particular pushed prices up.
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Inflation peaked in 2022. Although it went down in 2023, the road there was ‘bumpy’ and with ‘fluctuations’. This was because higher wages led to higher prices. “Wage growth gave the decline in inflation a longer tail,” says Aggie van Huisseling, economist at ABN-Amro.
‘Long-term’ of inflation
Employees did not see their wages rise in line with inflation and are now catching up. In addition, they anticipate future inflation with higher wages. They assume that inflation will rise again in the future. Van Huisseling thinks that inflation will continue to lag for a long time, because the agreed wage increases will have an impact on the inflation figure.
There is no question of a wage-price spiral, in which wages and prices continue to push each other up. The chance of this remains limited, says Van Huisseling. ‘But it remains important to keep an eye on wage growth. We want inflation to come down further.’
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