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‘Banks’ deposit rates have been changing ahead of schedule, which can’t be said about loans’

by CBDC Insider Staff
August 10, 2020
in Africa, Asia, Business, Central America, Europe, Middle East, South America, US
Reading Time: 1min read
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‘Banks’ deposit rates have been changing ahead of schedule, which can’t be said about loans’
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The Central Bank keeps lowering the key rate with amazing regularity. In the last year, it has decreased almost twice. In June 2019, it was fixed at 7,75%, it reduced to 7% in October, to 6,5% in November, to 6,25% in January 2020, to 6% by March. In May, it was lowered to 5,5%, to 4,5% in June, and it became known about a new record low on 24 July — the key rate was cut to 4,25%.

The key rate directly influences the economic life in the country. If we particularly compare it with rates of bank deposits and some types of loans, we can think they are intertwined: after a reduction in the key rate of the Central Bank, banks almost instantaneously reduce deposit rates. Moreover, such a process with loan rates is notably slower, and it is somehow perceptible only to mortgages in general. Economist and blogger Albert Bikbov explains how it works: banks take money from the Central Bank for a wholesale price and use retail prices with a surcharge for their own needs.

Continue read: https://realnoevremya.com/articles/4681-relation-between-central-bank-rate-and-deposit-rates

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