The turnaround in interest rates will affect all savers and borrowers

Zero interest rates with an inflation rate of 7.4 percent – an unusual combination. While the US Federal Reserve has already tightened the reins in two rate hikes totaling 75 basis points, key interest rates in the euro zone hover between zero and minus one.

But a turnaround in interest rates is likely this year. Christine Lagarde, head of the European Central Bank (ECB), announced on Wednesday a first rate hike in the third quarter, between July and September. One thing is certain: a turnaround in interest rates will have severe effects on savings, debt, equity, bond, credit or banking markets. In some cases, markets and banks have already anticipated the turnaround in interest rates.

The latest attempt to change interest rates dates back to 2011

The benchmark interest rate for the 19 euro countries, the main refinancing rate, has been zero for six years. Banks can borrow money from the ECB at this rate. The deposit rate for banks, at which they can park excess funds at the central bank, has been negative since 2014, currently at minus 0.5 percent.

Interest rate hike in the summer. ECB head Christine Lagarde promises a turnaround in interest rates in the near future.
© IMAGO / Political moments

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