Rising inflation has caused prices to rise and additionally worried citizens who are in debt. The question arises dailywhether, due to the overall geopolitical situation in Bosnia and Herzegovina (BiH), interest rates can be expected to rise.
Minor change
Berislav Kutle, director of the Association of Banks of BiH, spoke about this topic. As he stressed, if an increase appears, it will be minor.
”The interest rate in the world, even in our country, is at the lowest possible level in the last fifty years. It was normal to expect it to change for one reason or another. We need to be careful about it and be prepared for change. Looking at the overall picture regarding interest rates, we need to look at it together and in parallel with interest on deposits.
Money, as a measure of value and the preservation of that value, should have interest in line with inflation. In this case, that means that there will have to be an increase in interest rates on loans, as well as on deposits. To the delight of those with loans, interest rates will increase much more slowly than inflation, so that in the future period (at least this and next year) this change is expected, but it will be minor,” Kutle mentioned.
Lower demand
Namely, he added that it was not realistic to expect a larger increase in interest rates from the European Central Bank (ECB) due to problems in the European Union (EU).
”Unfortunately, people with deposits will lose at least 8 percent of the value of money every year, because it will not be covered by the interest,” noted Kutle.
Demand for loans is lower than expected and will remain so until the end of the year, although more and more citizens are taking non-purpose loans. The fall in prices, he explains, can be expected when money without any purpose is no longer printed.
”The rise in prices was caused by the war in Ukraine, which caused instability, ie a shortage of basic raw materials. Another reason for the price increase is the enormous amount of money that the ECB released on the market without cover, and as such it causes so-called stagflation,” Kutle pointed out.
The end of the war in Ukraine and the cessation of printingmoney that has no purpose, together with real interest rates, would lead to a drop in inflation in the long run, and then to a fall in prices.
The right option
When raising a loan, one of the basic dilemmas of citizens is which interest rate to choose, fixed or variable. According to Kutle, this dilemma could have existed until the beginning of this year, but now everything is clear.
”The only right choice is a fixed interest rate because then we know what kind of burdens we are entering and how to deal with the loan installment,” Kutle concluded, Avaz writes.
E.Dz.
