Banks are bracing for a jump in inflation

Banks increased interest rates on household loans and reduced the cost of loans for businesses and mostly for big companies in June, according to data from the Bulgarian National Bank (BNB), quoted by Darik Finance.

Meanwhile, interest rates on household deposits fell, while rates on business deposits went up. These changes may be a sign that banks are bracing for a rise in inflation in Bulgaria. In such a scenario, the exposure of household loans will increase, especially in the case of debts without collateral, because maintenance costs will soar.

A possible rise in consumer price inflation will have a smaller effect on businesses, especially for big export companies.

The average interest rate on corporate term deposits in BGN rose by 35 basic points in June 2012, while the interest rate on deposits in Euro increased by 7 basic points from May, reaching 3.32% and 3.72%, respectively.

Interest rates on household term deposits continue to fall. In June, interest rates on deposits in BGN dropped by 9 basic points, while those in Euro went down by 21 basic points to 4.92% and 4.37%, respectively.

The cost of most business loans also declined. Interest rates on BGN-denominated loans of up to €1 mln declined by 48 basic points to an average of 8.28% in June. At the same time, Euro-denominated loans went up by 34 basic points from May to 8.35%.

Interest rates on BGN-denominated loans of over €1 mln decreased by 351 basic points (3.51%) to an average of 5.34%. Interest rates on comparable Euro-denominated loans fell by 124 basic points to an average of 6.91%.

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