Money saved in bank accounts fell to 991,000 million in January, also depressed by cost-of-living rises, though still 1.5% higher than a year ago
First moves by the Spaniards with the huge amount of money saved in bank accounts and deposits in recent years. The lack of compensation for these products has prompted some citizens to withdraw part of these amounts from the bank in order to allocate them to other investment products. Although also to pay the costs of an increasingly expensive daily living. Both variables explain why money on deposit fell by 13,000 million in one month, going from the trillion euros reached in December to the 991,000 million euros recorded in January, according to data from the Bank of Spain. In any case, this amount is still 3.3% higher than that of a year earlier. The same is not happening at companies, whose savings are down nearly 1.5% year-on-year.
In recent months, money saved on deposits had grown significantly, following the pandemic crisis, allowing part of that citizens’ income to be saved in the bank. However, the interest rate increase approved by the European Central Bank (ECB) since last July has made interest rates on loans more expensive, not interest rates on savings. Faced with this situation, the government debt became an alternative to the fee at the beginning of the year with an interest rate of almost 3% on one-year Treasury bills.
In this context, many citizens have started acquiring treasury bills during various auctions held in the first weeks of 2023, even queuing at the Bank of Spain headquarters to buy these products. The Treasury’s website collapsed within days and the regulator has had to strengthen its system of in-person appointments to meet all the demand from small investors. Because deposits are still not yielding much: 0.64% year-on-year, according to the latest statistics from the Bank of Spain.
Currently, financial institutions are reluctant to improve this return on savings, or at least they won’t until “the competition moves.” It is the slogan given by the presidents of the Spanish banks when presenting the results of their entities not to move. However, they urged to promote investment through other products, such as fixed income funds, many of which are linked to Spanish or European debt, with better returns, but also with a little more risk than classic bank deposits.
Withdrawing money from current accounts is also related to an economy where prices continue to rise and the cost of living has to use some of that savings. According to the latest available data – third quarter of 2022 – Spain’s savings rate is at 5.7%, already well below the record set in the middle of the pandemic, which is more than 25%. With a shopping basket that just won’t stop giving in (food rises by more than 15% on average), households are starting to withdraw from accumulated savings to cope with everyday life.
The ECB is waiting for moves
Just this Monday, the President of the European Central Bank (ECB), Chtistine Lagarde, expressed her expectation that the banks will reflect in the remuneration offered for their customers’ deposits the interest rate rises of the institution, which will increase the price of money to manage inflation in line with the medium-term target of 2%.
“We want our rate hikes to be transferred to the financial sector, including the banks. I hope, as we want monetary transmission to be through the economy, that banks will reflect these rate hikes in their deposit rates as well,” Lagarde stressed in an interview with The Economic Times.
With regard to the ECB’s monetary policy, the French company recalled that the institution has been raising interest rates at an unprecedented rate and magnitude since last July and reiterated that more hikes will be made if necessary to bring inflation back to normal in a timely manner. 2% target. .
“It will take whatever it takes. What I know is that we’re going to bring inflation down to 2%. And we don’t just want to bring it back to 2%, but keep it there in a sustainable way,” he stated, pointing out that interest rates are the most efficient tool in the current circumstances.
Source: La Verdad
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
