Savings rate remains historically low for now

Posted on 21-03-2021 by D. Voesenek

Last year, the European Central Bank announced that it would not raise interest rates until the end of summer 2019. Recently, however, the central bank indicated that interest rates will not be raised again this year. This is because growth and inflation forecasts for the eurozone have been revised down. As a result, savings rates will remain historically low for the time being.

Global factors leading

'Persistent uncertainties related to geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets seem to be leaving their mark on economic sentiment,' said Mario Draghi, the central bank president. Global factors such as the slowdown in growth due to problems in China, potentially declining growth in the United States and the trade war between the two countries are cited as causes. Also discussed are developments in Europe such as the weakening European auto industry and the political situation in Italy. These factors pose a risk to growth and inflation expectations.

'Chance of recession far away, however'

However, the chance of recession is far away. After all, wage growth is still developing positively. 'We are talking about slowing growth, not contraction' Draghi said. Growth is expected to pick up again in the second half of 2019.

First rate hike in June 2021

Analysis by Rabobank shows that the first interest rate hike is not expected until June 2021. Besides delaying the interest rate hike, the central bank remains active as a market maker. The bought-up bonds will be rolled over in the coming years and will not be transferred to the market for the time being. Banks will also have easier access to the central bank's lending window from September. This time on stricter terms than previous rounds of funding.

Thirst for yield

With inflation still above the average savings rate and taxes on savings, savers are not improving. The big drive for yield will continue. A suitable alternative is investing with real estate as collateral. A stable and solid way to achieve returns. After all, a property has its tenant(s) and the collateral remains.