Portuguese Term Deposit Rates Fall to 1.34% in August, Marking 18-Month Low
The Bank of Portugal (BdP) reported on Wednesday that the average interest rate on new term deposits from individuals fell to 1.34% in August, continuing a downward trend for the 20th consecutive month. This rate is the lowest recorded since April 2023, when it stood at 1.14%, and reflects a significant shift in the remuneration offered by the nation's banking institutions.
The data, released by the central banking supervisor, indicates a month-over-month decrease of 0.05 percentage points from July. The decline is even more pronounced when viewed in a year-over-year context, with the current rate of 1.34% being substantially lower than the 2.56% offered in August of the previous year. The methodology used by the Bank of Portugal tracks all new deposit operations constituted by individuals within the national banking system during the reference month.
Specific numerical findings from the report show a steady erosion from the recent peak of 3.08% in December 2023, which was the highest rate seen since July 2012. The total volume of new term deposit operations for individuals also saw a decline, falling by 926 million euros to a total of 11.238 billion euros in August. This reduction in both rates and volume points to a changing dynamic in household savings behavior.
A geographic breakdown was not provided in the national statistics, but the rates apply to banking institutions operating across Portugal, including in major economic centers like Lisbon and Porto. The trend is consistent with the broader monetary policy adjustments occurring within the Eurozone, although Portugal's rates are falling at a notable pace compared to some of its European counterparts.
In its time period comparisons, the Bank of Portugal highlighted that the current rate marks a 1.74 percentage point drop from the December 2023 high. This sustained decrease has implications for the financial strategies of households and the overall flow of capital within the economy. The report also noted that the average rate for new deposits across the entire euro area stood at 1.76% in August, placing Portugal as the country with the fifth-lowest remuneration for savers in the monetary union.
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The market segment analysis within the report shows that deposits with a maturity of up to one year dominated the market, representing 94% of all new operations in August. The average rate for this segment was 1.34%. In contrast, deposits with a term between one and two years offered a slightly higher rate of 1.39%, which remained unchanged from the previous month, making it the most attractive term class for savers seeking marginally better returns.
Industry expert commentary from economists suggests this trend is a direct consequence of the European Central Bank's recent policy stance. A senior economist from a major Portuguese bank, who wished to remain anonymous, stated, 'The transmission of monetary policy to deposit rates is clear. As key interest rates have stabilized and are expected to fall, banks are adjusting their funding costs downwards. Savers are now facing an environment where holding cash in the bank yields progressively less.' The government has not issued a direct response to these specific figures, as they reflect market-driven adjustments by private banking entities.
The report also provided data for the corporate sector, where the average remuneration for new term deposits also decreased, moving from 1.66% in July to 1.62% in August. This marked the 16th consecutive monthly decline for businesses, with new operations totaling 7.943 billion euros. Similar to the individual segment, short-term deposits of up to one year were overwhelmingly preferred, accounting for 99.6% of the total for companies.
Historically, these rate levels bring Portugal closer to the near-zero interest rate environment experienced in the previous decade. The sustained decline over nearly two years indicates a long-term structural shift rather than a short-term fluctuation. The Bank of Portugal will continue to monitor these developments, with the next set of data expected to provide further insight into the fourth quarter of the year.
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