ECB impact explained What the key interest rate cut means for your wallet

The European Central Bank (ECB) has lowered the key interest rate. blue News explains what impact this will have on your wallet.

The European Central Bank (ECB) is reacting to the slowdown in inflation in the eurozone. The deposit rate, which sets the trend on the financial market and which banks receive when they park surplus money with the central bank, is falling by 0.25 percentage points to 3.5 percent.

What effects can you expect? blue News explains the consequences.

A lower key interest rate basically means that money becomes cheaper. The key interest rate determines how expensive it is for banks to borrow money from the central bank. If the key interest rate is low, banks can therefore offer their customers better interest rates on loans. If the key interest rate is high, on the other hand, lending rates rise.

In terms of the economy as a whole, a low key interest rate encourages consumer spending and investment. The growing demand for money promotes economic growth and the stock market. In short: the economy is boosted. Interest rates on savings, on the other hand, fall.

Numerous experts believe so. Karsten Junius, Chief Economist at Bank J. Safra Sarasin, told "Cash.ch" that he expects at least two more interest rate cuts by next summer. The level should then fall from 1.25 to just 0.5 percent.

This will also boost the economy, says Junius. "Low interest rates are good for the economy."

Rents are not directly based on the key interest rate of the Swiss National Bank or the European Central Bank, but on the mortgage reference interest rate. The reference interest rate is an average of all interest rates paid on mortgages. It is therefore sluggish. It takes time for it to rise or fall. Recently, there were two increases in this interest rate, which resulted in rents rising throughout Switzerland.

Now, however, the reference interest rate is at a standstill - and is likely to fall again soon. According to Karsten Junius, this could be the case in the coming months. The important thing is that as soon as the reference interest rate falls, a reduction in the rent can be demanded.

The prices of food and other products are based on inflation. This is currently declining in Switzerland, which means that prices are falling or no longer rising as sharply.

Inflation could continue to fall in the coming months. The central banks are monitoring the situation closely. However, goods abroad could become cheaper. For shopping tourists who go shopping from Switzerland to Germany, conditions are likely to be better again.

That could indeed be the case. If the ECB lowers its key interest rates, the euro will weaken and the franc will strengthen. This will make products and services abroad comparatively cheaper. It is unclear how long this will last or whether the SNB will soon follow suit and nullify the effect.

No. The lower the key interest rate, the less worthwhile it is to save. If the SNB or the ECB lowers the key interest rate, the banks will also tend to lower interest rates on savings deposits.