Yeah, most deposit rates will not increase fully in-line with potential ECB rate increases for the moment because:
- Irish banks are awash with deposits.
- Irish banks do not need to attract more deposits.
- As things currently stands, Irish banks pay negative rates on some surplus deposits.
- KBC and Ulster Bank deposits compounding the problem.
BUT
- If the ECB negative deposit rate gets less negative, then it is plausible that business deposit rates and high personal deposit rates (typically 1m/3m+) will improve in line with the ECB increases.
- If the ECB deposit rate goes significantly positive, then banks might have the incentive to look for retail deposits again.
- Even if the Irish banks do not need deposits, there are non-Irish bank competitors in the market, who might see an opportunity to take market share.
- Media pressure may happen. If Irish banks hike mortgage rates, but do not touch deposit rates, despite the fact that deposits fund the mortgages, some media pressure may occur, but this might make little to no difference.
In the US, increases by the FED, have caused slight increases to the average deposit rates. Maybe we will see some token increases here too.
Deposit rates may have bottomed finally but in most cases will be very slow to move in the other direction.