Hooray, there are interest rates again – with this jubilation, a German tabloid newspaper overwrites the supposed sensation of the year: According to the newspaper with the four capital letters, since the record low in mid-April, the interest on fixed deposits at some banks has more than doubled. The turnaround in interest rates has therefore also reached private customers and the savings banks have also recently followed suit: According to a survey by Stiftung Warentest, around half of the savings banks will again pay interest on fixed-term deposits in July 2022.

Stiftung Warentest has calculated how good the “best offers” mentioned in the reports really are – and the numbers are sobering: With overnight money there is currently up to 0.25 percent interest per year, with fixed-term deposits 1.30 percent for a one-year term and 1.70 percent for a three-year fixed deposit.

In view of these figures, the financial journalists of the southern German regional newspaper “Südwestpresse” strike a less euphoric tone: “Savers shouldn’t celebrate too soon,” says a commentary. Because actually the interest rates are not yet so high “that in the end so much more money jumps out”. According to the Südwestpresse, interest rates are currently only being increased to the extent that they cushion the price increase.

And even that is not true – because the inflation rate of almost eight percent eats up any interest rate hikes. The small amount generated by the rising interest rates disappears into thin air as the inflation rate continues to rise. The Südwestpresse sums it up: “It is of course possible that interest rates will continue to rise – then the world might look different after all.”

Consumers are currently having to pay more in many corners and ends because of the record inflation and the mini-interest rate turnaround: After real estate prices have already risen to a record high, financing costs are now increasing. In plain language: fewer and fewer Germans will be able to afford to buy their own home or apartment. And when the fixed interest rates expire for current home builders, there will be a rude awakening in many places.

In addition to buying real estate, investments in consumer goods or other major purchases that are financed on credit are also becoming more expensive. Actually, the European Central Bank wanted to encourage the population to spend money through the policy of cheap money. But now it’s getting really expensive to live “on pump” and take out loans: According to the Stiftung Warentest, interest rates for installment loans are currently between 1.89 and 6.70 percent, and the trend is clearly rising: the comparison portal is counting on this for the rest of the year average effective interest rates of up to five percent.

Against this background, it is hardly surprising that more and more economists are forecasting stagflation, i.e. economic stagnation with massively increasing living costs, or even a recession. Because consumers have been suffering from the massive price increases in almost all areas of daily life for a long time – and if they now make a larger purchase, they also have to cope with significantly higher loan interest rates in addition to the skyrocketing prices for the desired product.

Many families will therefore consider whether the new car is really necessary and whether the old flat screen TV will not be good for a few more years. The Germans are used to saving – and they will keep their money together. But all the money that ends up in the savings account or is invested as overnight money continues to lose value massively due to record inflation. The bottom line is that not only the central banks, but also the people in Germany and Europe are in a dead end – and cheering about higher interest rates at banks and savings banks is not necessarily appropriate.

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