Easter-driven inflation bounce is no concern

Flash HICP inflation for April came in above consensus expectations but in line with our forecast. Headline inflation came in at 2.2% vs 2.1% consensus, with the core at 2.7% vs 2.5% consensus. As we had expected, headline inflation was weighed by a significant drag from energy prices, which fell 3.6% m/m – driven by both pass-through of lower oil prices to petrol prices, but also from lower natural gas prices to household energy bills. However, core inflation saw significant upward pressure from the later timing of Easter this year, which as we had expected, lifted services inflation to 3.9% y/y, likely driven by higher hotel rates, airfares and other travel related costs (we do not yet have the full details). This move higher in services inflation followed a correspondingly downwardly distorted March figure, as we noted in our March inflation comment. With Easter timing the main driver of the core inflation bounce, we do not think this portends an end to the disinflationary process, and we expect the ECB’s Governing Council to similarly look through this temporary hump in inflation.

Indeed, looking ahead, the drivers of inflation if anything point downward. First, energy prices are likely to continue weighing on headline inflation, and we expect an undershoot of the ECB’s 2% target by late summer. Second, despite the risk of EU retaliation against US tariffs, any retaliation will likely be more than offset by the demand shock from lower exports to the US. Third, the main driver of services inflation – wage growth – remains in a clear downtrend, with both the Indeed monthly tracker continuing to reach new post-pandemic lows, and the ECB’s forward-looking tracker pointing to a full normalisation in negotiated wage growth by the end of the year. See our latest Eurozone outlook for more.

The Netherlands – Easter and May holiday timing spur rise in services prices

Dutch inflation (CPI) has picked up again to 4.1% y/y in April, up from 3.7% in March. The m/m increase was largely driven by services inflation, likely due to seasonal effects from a changed timing of Easter, which fell in mid-April this year instead of late March last year, in combination with an earlier May holiday. While the underlying details are not yet available, the Central Bureau of Statistics (CBS) reports that prices for items such as airline tickets, hotels, and bungalow parks have risen. This indicates that the increase in services inflation is mostly due to these seasonal influences.

Generally, the inflation figure is largely driven by services. Due to the large share of labour costs in total costs, services inflation is heavily influenced by wage developments. While wage growth is still high it is gradually declining, thereby exerting less pressure on the inflation figure. Additionally, increased housing rents contribute to the inflation rate.

Food prices have increased slightly increased again m/m. Higher tobacco duties still play a role in food inflation, and add an estimated 0.6pp to the overall CPI. This effect is expected to gradually diminish from June onwards. Energy prices continue to exert downward pressure on the inflation figure, as energy prices were higher last year than in the same months this year.

We expect that inflation will decrease in the coming months. However, Dutch CPI remains above that of the eurozone, and we forecast it to average 3.4% in 2025 and 2.7% in 2026. Three factors contribute to this. Firstly, the higher inflation peak in 2022 leads to a more significant wage catch-up in the Netherlands, resulting in larger second-round effects on services prices. Secondly, expansive fiscal policy contributes to inflation. Finally, planned tax increases in 2026, such as on hotels, recreation and fuel duties, exert upward pressure on the inflation figure.