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AMSTERDAM, Aug 10: The introduction of euro notes and coins at the start of the year has pushed Dutch inflation up by 0.6 percentage point, double the previously expected level, Dutch Central Bank President Nout Wellink told Dutch television.
Wellink said on the news programme NOVA late on Friday that new research carried out by the bank in July showed the introduction of the new currency boosted retail prices by about double the 0.7 percentage point a study done in January had showed.
Retail prices are part of a basket of items, including housing and energy prices among other items, that are measured to determine overall inflation.
The European Union’s statistics agency, Eurostat, said last month the switch to euro cash had boosted consumer prices by at most 0.2 percentage point in the first half of the year, slightly up from the 0.16 point it esimated for the first quarter.
Dutch inflation was sharply above the euro zone average in July, data released Friday showed, rising to 3.5 per cent from 3.4 per cent in June. Economists have said the tight labour market remained a key factor in that figure.
Euro zone inflation was estimated to have risen to 1.9 per cent in July from 1.8 per cent in June.
On Wednesday, the Dutch government think tank Central Planning Bureau cut its growth forecast for 2002 to 0.75 per cent from a previous estimate of 1.0 per cent and its 2003 projection to 1.5 per cent from 2.75 per cent.
It also widened its budget deficit forecasts for the Netherlands to 0.5 per cent of gross domestic product (GDP) from 0.3 per cent for 2002.
NEW YORK: US dollar interest-rate swap spreads were mainly wider in thin trade on Friday as some investors paid fixed rates, potentially taking profits on trades.
Five-year swap spreads widened 1-1/4 basis points to 59-1/2 basis points.
The gap narrowed after investors began backpedaling on the likelihood of a Federal Reserve rate cut next week, moving funds out of shorter-dated instruments and into longer-dated securities, and decreasing the premium in yield investors demand for longer-term investments.
Investor interest in paying fixed rates was strong enough to move the market, but not overwhelming, traders said.
In spite of the widening on Friday, swap spreads broadly narrowed this week following heavy Treasury issuance and some reduction in perceived global financial risk after Brazil secured a $30 billion rescue package from the International Monetary Fund.
On Friday, there was only sporadic interest in receiving fixed rates in swaps, traders said. A few mortgage accounts sought to receive fixed rates in the 10-year sector, traders said, but that activity was muted.
Mortgage players, such as mortgage bond investors, appear to be favoring Treasuries over swaps as a hedging tool, said Priya Misra, interest-rate strategist at Lehman Brothers.
That would cause Treasuries to appreciate in value relative to swaps, pushing spreads wider.
Mortgage accounts may be favoring Treasuries because they hesitate to take on the risk of swap spreads widening, given questions about risk in the financial sector, Misra said.—Reuters
