Low interest: just a little longer and we don’t know any better

 

That the return on our savings accounts is negligibly low nowadays will be confirmed by everyone who has a savings account. Most consumers are no longer surprised when they receive a message from their bank that interest rates have again been lowered. Almost all savings accounts currently use an interest rate that falls to zero. Occasionally (especially in Germany) there are even messages about a so-called negative savings interest. In that case there is no return; the account holder must then even pay extra for depositing money in the account. That this is currently a given fact seems to be fewer and fewer people really doing something. Rather than worrying about interest rates, many consumers look for alternatives. They often find such an alternative in investments where the return is much higher, but the risks are naturally also greater.

Board member EB: low interest rates are a problem

Board member EB: low interest rates are a problem

Just accept the low interest rates on savings accounts as a fixed fact with little to do about it. It is a logical way of thinking. Yet there is a danger in it. That is what Yves Mersch claims. With regard to banking matters, it cannot be said that he does not know what he is talking about. This Luxembourger is in fact a member of the Executive Board of the EurCen bank (EB). So some value can be attached to his opinion. But what is the problem according to Mersch with regard to a (long-term) low interest rate? In an interview with a German newspaper, the EB executive states that a generation is currently growing up “without knowing what interest on money means”. Mersch then states that he is afraid that the savings culture as we have known it in Europe for years will disappear completely. That can be problematic. Storing money in a savings account has the great advantage that the money is safe and that the financial risks for the owner of the account are zero.

Interest rates must be increased

Interest rates must be increased

The chance that more and more people are opting for an alternative to the savings account is quite present. The Bitcoin is mentioned as an example. According to Mersch, this is “a speculative hype that we should be concerned about.” Yves Mersch (EB) believes that central banks should therefore act to reverse the trend of looking for alternatives to a savings account. According to Mersch, one can no longer wait too long here. He proposes to ‘normalize’ the tariff policy. In fact, he means that the interest rate on savings accounts should be brought back to an acceptable level. In steps, but certainly not too slow.

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