On the De Nederlandsche Bank website, find the European Central Bank's (ECB) target inflation rate. Briefly explain how the ECB uses interest rate changes (both increases and decreases) to influence inflation in the economy, based on the information provided.
Navigate to dnb.nl. Accept the cookie preferences. Click on 'Aanpak van inflatie' (Approach to inflation) under 'Actuele vraagstukken'. Identify the ECB's target inflation rate. Locate and summarize the explanations for how interest rate increases affect inflation. Locate and summarize the explanations for how interest rate decreases affect inflation.
State that the ECB's target inflation is 2%. Explain that an interest rate increase makes borrowing more expensive and saving more attractive, leading to less spending, decreased demand, and a decrease in inflation. Explain that an interest rate decrease makes borrowing cheaper and saving less attractive, leading to more spending, increased demand, and an increase in inflation.