One of the severest consequences of the persistent phase of low interest rates is the collapse of interest income on financial investments. According to our latest calculations, German citizens lost income of nearly EUR 436bn over the period 2010 to 2017 compared with what would have been if interest rates had remained at normal levels. Even if one offsets the savings made through favourable rates on loans, net interest losses of almost EUR 250bn remain.
Germans will face an even greater loss of interest income in 2017 too. Inflation is also expected to stage a “comeback”. This is likely to lower the average real interest rate for deposits, bonds and insurances to -0.8 percent this year, leading to a loss of more than EUR 37bn in the value of private financial assets. It is time to change tack on monetary policy, not only for this reason, but also because fundamental data such as economic growth and inflation no longer justify the monetary policy currently pursued by the ECB.