Transcript generated automatically by AI and may contain errors.
Chapter 1: What is the main topic discussed in this episode?
The Clare Byrne Show on Newstalk with Aviva Insurance.
Chapter 2: What is the current outlook for interest rates?
Interest rates are expected to rise this year. That'll be good news if you're a saver, but not such good news for your mortgage or your variable loan. Here to explain more is Wealth Management Advisor with Jigsaw Finance, Lorraine Cook. Hello, Lorraine. Good to see you. So interest rates, what's the word on interest rates and what's going to happen this year?
So it's likely the European Central Bank are meeting this month. Now, they have said that they are holding fire. At the end of April, they wanted to just hold things to see what was going to happen over the next number of weeks between inflation. So due to the energy crisis, inflation has risen. The cost of everything has gone up.
And in that regard, what has happened now is the European Central Bank has to monitor that to see do they need to Restrict spending and tighten monetary policy.
OK, so we are, because nothing is settling in the Middle East and we're reporting on it every single day, it means that the ECB is going to use increasing interest rates to control prices, to control inflation. That is the tool they have at their disposal. So that means that we could be looking at three interest rate rises before the end of the year.
That's what's forecasted. So at the moment, if they do increase the rates, possibly the end of this month or next week, as you think they're due to meet, it could be, for example, a quarter of a percent is what's forecasted. Inflation at the end of May was three and a half percent. The magic number that the European Central Bank want inflation at is at two percent.
When the Ukraine-Russia invasion happened, inflation soared. So by the end of 2023, we were at 9.5%. So that's where we saw interest rates go up 10 times by the European Central Bank. Now, they did pass on eight rate cuts when inflation came back down. We're in this environment again where inflation is increasing. But due to the geopolitical and the economic uncertainty...
And how long this will go on for, they are just monitoring it at the moment. But it is expected that they will increase the rates.
OK, so that is good news for savers. And I start with the good news. So for savers, they'll be very happy about this.
If the banks pass on the deposit rate increase. So the banks tend to be a little bit slow on passing on the deposit rate increase. So the money that you have in your deposit account increases. So currently, if you check that, you might be getting a terrible, well, most likely will be at a terrible rate.
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