In the current climate in the vast majority of major economies, finding a decent rate for savings held in banks or building societies is next to impossible. From a saver’s perspective, interest rates are at rock bottom. This is because central banks have adopted accommodative monetary policies which are designed to provide “cheap” money to banks for onward lending to business with the aim of boosting still lack-lustre economic growth. Coupled with low consumer price index inflation or deflation due to a combination of merchants cutting prices to drive weak demand and substantial falls in fuel and energy prices on the back of significant falls in the price of crude oil, there is no pressure on central banks to curb inflation within the economies they oversee. As an upshot, most savers are being offered interest rates near historic lows for their funds, but by shopping around better rates can often be found.
Spare a thought for Brazil, once seen as an upcoming economic superpower. The Banco Central da Brasil has just increased interest rates to a fresh six-year high of a dizzying 12.75% in a bid to rein in inflation, with a further hike of 0.5% to the rate. The move has been made to combat inflation that is running at 7.4%, according to figures released last month, well above the target value of 6.5%. It gives a margin of an attractive 5.35% for funds held on deposit, so it could stimulate an inflow of foreign cash. The downside is the that Brazilian Real is at an eleven year low, falling by 2% on Wednesday – any further depreciation would erode the value of funds flowing into Brazil to take advantage of the generous interest rate.
Brazil’s economy is expected to shrink by 0.5% this year and industrial output was down by 5.2% in January compared to twelve months earlier.
The Ukrainian central bank has hiked its interest rate to a whopping 30%. It is in the throes of a civil war which it claims is being sponsored by neighbouring Russia. Ukraine’s inflation is projected to hit 26% this year and the currency has fallen by 80% in ten months against the US Dollar (which, in fairness, is on a Bull Run) as a result of the turmoil which, despite a recent cease-fire is still ongoing.