In September 2023, the European Central Bank (ECB) raised its benchmark deposit rate to 4%, in an effort to combat high inflation. This was the 10th consecutive rise, from minus 0.5%, in just over a year. Irish deposit rates increased as a result, whilst still remaining below the eurozone average.
Then, in June 2024, the ECB cut the deposit rate for the first time in almost five years, to 3.75%. Another rate cut followed in September, leaving the main deposit rate at 3.50%.
Read on to discover if and when interest rates are likely to increase or decrease again, and what this could mean for savings accounts.
Inflation in Ireland is currently 2.2%
The ECB has cut its key benchmark interest rates twice in three months
High interest rates may not be around for much longer
At its most recent meeting on 12 September 2024, the Governing Council of the ECB decided to lower the deposit facility rate by 25 basis points, to 3.50%. The interest rates on the main refinancing operations and the marginal lending facility were lowered to 3.65% and 3.90% respectively.
These rates are used as a reference point by Irish banks when setting their own interest rates on loans and deposits.
The annual inflation rate in Ireland was 2.2% in July, down from 2.6% in May, and the lowest level in three years.
The ECB has cut interest rates twice this year. So, what does this mean for Irish savers?
While this will drive down mortgage rates, it will also impact rates for savers. Time could be running out to take advantage of strong rate offerings, and now might be the ideal time to lock your money away.
Following 10 consecutive rate hikes that began in July 2022, the ECB lowered its record-high deposit rate by 25 basis points in June 2024. It was cut again in September, and currently stands at 3.50%.
According to figures from the Central Bank of Ireland, the average interest rate on new Irish mortgage agreements was 4.11% at the end of July, unchanged from the previous month.
It looks as though interest rates in Ireland will decrease, following the recent ECB rate cuts, but this is dependent on the wider economy, and what happens in the eurozone.
Some experts have predicted another rate cut in December, as long as inflation is under control.
Put simply, ECB rate cuts mean that high savings interest rates may not be around for much longer.
Here are some tips for savers in Ireland in the current interest rate environment:
So, what's the best savings account for you? This will depend on various factors, for example the amount you have to invest, and whether you’ll need access to your money. If you can afford to lock your money away for a set period, you might opt for a fixed interest rate product. This type of savings account typically offers the most competitive rates, and is ideal for long term savings goals.
Public Expenditure Minister, Paschal Donohoe, has said:
“Looking to put money in other parts of Europe, and other banks elsewhere in Europe, is not an unpatriotic act. It’s the way the single market functions.”
Regardless of what happens to the interest rate in Ireland, there’s never a bad time to save. Whether it’s to take advantage of competitive interest rates whilst they're still around, or to protect yourself and your family from unforeseen financial expenses, opening a savings account will give you more for your money.
To find the best savings account for you, register for a free Raisin Account today and compare interest rates from banks across Europe.