Increasing ECB interest rates is a danger: This graph shows that the delay in rising interest rates at the ECB is a threat to the economies of Spanish families:
- The Spaniards who invested the most in their economies in 2018 were in deposits, 4.4% of gross disposable income, according to data provided by the Bank of Spain, one of the financial instruments traditionally used by more conservative investors.
- In an environment with minimum interest rates, return on deposits has fallen, and if it does not exceed inflation, the investor may lose his purchasing power.
- The Bank of Spain, in its latest analytical article, shows that population savings were at minimum levels in 2018, although this was not an obstacle to increasing net purchases of financial assets.
The Spaniards remain conservative when it comes to investing their investments. At least, this is the result of the latest data published by the Bank of Spain and is something that, in the current context of minimum interest rates, can be a problem for families.
The Spaniards invested the most in their economies in 2018 in deposits, 4.4% of gross available income, one of the safest financial instruments, and one of those who leased less. This in a context where the household savings rate was at historic minimums.
Increasing ECB interest rates is a danger
All this data is collected by the Bank of Spain in its latest analytical article Evolution of financial flows and balances of households and non-financial corporations in 2018.
Despite the fact that the family savings rate is at a low level, the trend of growth in the net acquisition of financial assets by households continued last year. Thus, in 2018, this figure was 2.3% of the gross disposable income and represents an increase of 0.3 percentage points over the previous year.
Bank of Spain notes that most of these investments took the form of bank deposits, while net acquisitions of investment funds, representing 1.2% of gross disposable income, recorded the lowest level since 2012.
In addition, households continued to register net sales of securities, in particular shares and other equity, as well as fixed revenues, and reduced cash-settled funds, as in previous years.
Thus, the section where the shares were collected accounted for 3.2% of the gross disposable income, while the fixed income was 0.7% and the cash-based funds accounted for 1.1% of the gross available income.
There is no better or worse than other investments, depending on the investor profile, the goal you want to achieve with it or your risk aversion. However, in a context of low rates, what is happening is that the deposits give a sportsman a minimal return.
The problem with this deviation if profitability does not exceed inflation, in the long run, ends up losing money because tomorrow with 100 euros you can buy more than 100 euros today.
The CPI in Spain closed the 1.2% level in December 2018. A low rate, taking into account that the ECB's mandate is to keep inflation in the euro area around 2%, but not to exceed 2%. But, despite the fact that low should take into account that the best deposits of Spanish banks in general, not even 1% return.
In this context, the European Central Bank at its last meeting has delayed rising interest rates. The regulated ECB, Mario Draghi, said the agency was not going to make moves related to them at least until 2020 and did not even rule out less in the outside movement.
Low interest rates and a negative deposit facility were the instruments used to move the economy and make banks re-open the credit rate. But, on the other hand, they are also responsible for the fact that the entities have minimized the income they offer in their time deposits.
So with these tangles in the common monetary policy and the ECB in the full succession race, even if the hills like Olli Rehn opened the door to continue reducing the rate, it seems that there are still months of upward movement of rates interest.