High savings interest rates with short commitments

There are significantly higher interest rates on tied savings deposits in Austria than in the previous year. The Oesterreichische Nationalbank (OeNB) announced this on Friday, one day after the European Central Bank (ECB) raised key interest rates for the tenth time in a row.

On average, interest rates on new tied savings deposits were 2.85 percent in July – 2.44 percentage points more than in the previous year. Even short commitment periods are enough to get a significantly higher interest rate. There was an interest rate of 2.72 percent for three to six months. Those who tied up their money for two years received an average of 2.96 percent in July.

The OeNB explained that the key interest rate increases would have a similar impact on savings balances as on newly granted loans. For all loan purposes, loan interest rates averaged 5.03 percent in July, which corresponds to an increase of 2.83 percentage points.

However, interest rates rose to a much lesser extent on overnight savings deposits. The average interest rate here in July was 0.69 percent, which means an increase of 0.63 percentage points compared to the previous year.

Even if the overnight deposits of around 199 billion euros are about twice as high as the tied savings balances (96.4 billion), the higher interest rates are already having an impact. Overnight deposits fell by seven percent within a year, while tied savings balances rose by 18.6 percent.

ECB: interest rate cuts not an issue

According to its President Christine Lagarde, the ECB will keep interest rates high for as long as necessary to curb inflation. A rate cut is not up for debate, she said after a meeting of euro finance ministers in Santiago de Compostela. Her deputy Luis de Guindos countered speculation on the stock market about possible first interest rate cuts in mid-2024. This is “a bet” that could be right or wrong.

The interest rate peak may have been reached for the time being. “We believe that the recent increase in interest rates, if maintained for some time, could be enough to bring inflation closer to the two percent target,” de Guindos said.

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