Investors and savers are experiencing a positive turn thanks to the European Central Bank’s decision to raise interest rates in the euro zone by 4.5 percentage points since July 2022. This has led to significant shifts in capital market and savings rates, with the yield on ten-year German government bonds reaching above 3 percent for the first time since 2011. However, while the recent interest rate hike on the capital market was unexpected, there are many factors that influence interest rates aside from central bank decisions.
Economists predict that rising interest rates in the US will also impact interest rates in Europe to some extent. Inflation expectations, economic development, creditworthiness, and risk environment are just some of the factors that determine interest rates. While higher interest rates may offer attractive returns, there is always a level of risk involved. It is important for investors to understand that returns and risks are interconnected in financial markets and to diversify their investments accordingly.
Despite some banks offering high-interest rates on call money accounts, inflation remains high in Germany, leading to negative real interest rates. The rise in interest rates has had repercussions in other financial markets, with stock indices falling and the price of gold decreasing. However, size is not a guarantee of stability as seen in past financial crises where even large banks required state intervention. Therefore, investors should stay informed and consider their options carefully in the current financial environment.
Investors should be aware of potential risks associated with higher interest rates and take necessary measures to protect their investments. Some banks have risk premiums ranging from 50 to 130 basis points, but for institutions without corporate bonds, this risk measure cannot be calculated. In the worst-case scenario, deposit protection of up to 100,000 euros per bank and customer applies in Germany and the EU. This means that deposits are protected in the event of insolvency but customers may face delays in accessing their funds.
Overall, investors should be cautious when making investment decisions during uncertain times like these and seek professional advice before making any significant moves.
In conclusion, while higher interest rates may offer attractive returns on call money accounts at some banks such as Germany’s top lenders offering 4% or more interests on call money accounts recently; it is important for investors to understand that inflation expectations, economic development, creditworthiness
