Banks expect interest rate rises to lose momentum

Austrian banks expect interest rates to stop rising eventually, although another increase is possible, ORF reported. Higher rates are improving returns for savers but increasing costs for borrowers.

After a long period of low returns, savers can now find more attractive offers, including on one-year investments, said Klaus Kumpfmüller, chief executive of Hypo Oberösterreich.

The European Central Bank has raised its key interest rate several times this year to counter persistent inflation, driven in part by higher energy prices. In September, it increased the rate by 0.25 percentage points to 2.5 percent. Reinhard Schwendtbauer, head of Raiffeisenlandesbank Oberösterreich, said another 0.25-point rise in December was likely.

Higher rates also mean increased financing costs. Borrowers with variable-rate loans may see their regular repayments rise.

Despite the possibility of further increases, bank executives do not expect rates to keep climbing indefinitely. Christina Huber, head of Sparkasse Oberösterreich, said inflation forecasts for the coming years were already somewhat lower, suggesting there would be a limit to further rises.

The path of inflation will depend in part on energy prices. A decline in crude oil and other energy costs could ease price pressures and reduce the need for further rate increases. Oberbank chief executive Franz Gasselsberger said a lasting upward trend was unlikely and advised savers to secure current rates.