Modest Interest Rate Growth Expected for Savings Deposits

With the increase in interest rates on loans, interest rates on deposits will also rise, is the summary of the responses we received from banks and the Croatian Banking Association regarding whether interest rates on savings will rise proportionally with the increase in loan interest rates.

– Looking at the long term, we expect a proportional movement of active and passive interest rates – responded from HUB, noting that the average interest rate on time deposits in kuna with a currency clause increased from 0.23 percent at the end of last year to 0.38 percent in August this year, and on time deposits in foreign currency from 0.08 percent to 0.23 percent.

However, the increase in interest rates on deposits, at least according to current forecasts, will not be significant because, despite the European Central Bank raising interest rates, bankers in Croatia (in the short term) do not announce a significant increase in loan interest rates. Namely, the reduction of the required reserve rate, entry into the euro area, and economic slowdown are factors that currently mitigate the pressure to increase interest rates.

Currently, Erste Bank also does not plan to raise interest rates on newly approved loans for citizens, and in the segment of cash loans, it has even reduced the interest rate by 0.51 to 1.10 percentage points.

– In the business segment with the economy, interest rates have recently recorded a certain increase due to the rise in Euribor – responded from Erste Bank, adding that in the upcoming period, the level of interest rates will mostly depend on the moves of monetary policy makers in the segment of raising reference interest rates.

In short, further monetary tightening by the ECB next year could indeed lead to an increase in interest rates on loans, and consequently on deposits. However, due to high liquidity, the question is whether these rates will rise proportionally to those on loans.

– When it comes to interest rates on deposits, the increase in reference interest rates certainly creates a basis for a gradual rise in deposit interest rates. However, in the current environment of high liquidity, this process will be slower – conclude at Erste Bank. (A. K.)