4 min read.Updated: 06 May 2016, 09:25 AM ISTIra Dugal
The problem is that in recent years, the rate of growth in deposits has shown little correlation with real rates
In times of high inflation, when interest rates are on the rise, central bankers have often resorted to arguing the case from the depositors’ side. High inflation eats into savings and hits depositors. High inflation also means that the real interest earned on deposits is negative, which reduces the incentive to park savings in financial instruments and pushes depositors towards physical saving instruments like gold or real estate.