determine the interest rate development of short-term loans and financial investments. When interest rates are low, it makes sense to choose a fixed interest rate. Now that we are in the low interest phase, this is your big advantage. In a low interest rate range, the margin is shifting from. Finally, the target rate is often set lower than the actual residual value of the vehicle.
“Takes advantage of the low
Raising capital for corporate finance – with the current low interest rate, the situation on the financial market for SMEs is better than ever. We are a financially strong company. One of the reasons is that we go our own way in product development or corporate strategy. For this reason, we do not use the monetary offers of credit institutions in times of low or high interest rates.
This enables us to act much more independently and to position our projects better in competition. Although we are currently not making any new investments, the low interest rate phase is helping to optimize our liquidity situation. The short-term working capital loan business significantly improves our five-year investment plan. We are a financially strong company. One of the reasons is that we go our own way in product development or corporate strategy.
For this reason, we do not use the monetary offers of credit institutions in times of low or high interest rates. This enables us to act much more independently and to position our projects better in competition.
Low interest rate phase – reasons and background
In fact, the Niedringzink phase is no longer a stage, but has become a permanent state – but how did it come about, why is it so constant and what are the consequences today and in time? They raise interest rates during periods of economic growth to avoid overheating the economy.
It cuts interest rates in times of economic weakness to mitigate the effects of the low. However, the duration and scope of the current low interest rate phase are unprecedented: since 2008, the Fine Bank’s key interest rate has fallen almost continuously from 4.25 to 0.0 percentage points today. The so-called deposit rate that the commercial banks pay when they deposit surplus funds with the central bank is currently -0.4%.
Another cause of the low interest rate policy is the high level of government debt in many countries. Countries have to pay default interest on their debts, and these interest rates alone are a huge burden on many national budgets. With very low interest rates, budgets can be consolidated much more easily. In 2015 alone, the federal government calculated according to the Dt. Bank saves $ 43 billion through lower borrowing costs – compared to the level at the beginning of the financial market crisis in 2007; In addition, the public administration can take out new loans or earn money with them almost free of charge.
What are the consequences of the low interest rate phase?
One of the most obvious consequences is the steadily falling interest income for investors. People like to remember the time when they were able to transfer their savings to a savings account and sometimes received interest of over 4 percentage points. The low key interest rates – if still paid at all – no longer even compensate for the inflation rate.
Anyone who places their assets in a savings account in a very uncomplicated manner makes a permanent disadvantage. This applies in particular to low-income investors who, in practice, concentrate on risk-free but also low-interest investments. In addition, the willingness to save decreases when it no longer pays off.
According to a representative survey carried out by the Federal Association of German Banks in 2015, the percentage of those who save regularly has dropped from 59 to 53% in just one year. A key reason for the Fine Bank’s low-interest policy is that it offers cheap lending. This would mean a significantly higher interest rate for the comparatively more stable economy in Germany than for countries like Italy or Spain, which suffered from high public debt and unemployment rates.
So far, the principle was that those who lend money receive default interest, those who owe money have to pay default interest. In addition, those who invest permanently will be compensated for having paid the best interest rates. Entering into debt means almost nothing and those who take the lead are making losses in the long run.
Countries with high public debt would have to pay more interest on debt, which would put an additional burden on their already weakening economy. How can it be when interest rates are low? Critics of low interest policy repeatedly argue that there is little reason for a government in a debt-indebted country to put its households in order when it is hardly asked to pay because of the low interest rates.
According to critics of low interest rate policies, the Fine Bank has exhausted its monetary options. And how long does the low interest rate phase last? This was the case in 2015, for example, when the US Federal Reserve raised its interest rate prematurely for the first time in almost ten years – if only slightly from 0.25 to 0.5.
It is difficult to make precise predictions about interest rates, but many experts expect interest rates to increase gradually over the next 12 months.