The following are some effects of the deposit interest rate reduction:
1. Affect personal savings: For depositors, lowering the deposit interest rate means that the income of deposits will decrease. This may prompt depositors to look for other investment methods with higher returns, such as stocks, bonds or wealth management products.
2. Affect the loan market: the reduction of deposit interest rate usually leads to the reduction of loan interest rate. Lower loan interest rate will stimulate the loan demand of enterprises and individuals, and then promote economic growth. However, if the loan interest rate is too low, it may lead to an increase in credit risk, thus affecting the stability of the financial market.
3. Impact on commercial banks: The reduction of deposit interest rate may lead to the decline of profitability of commercial banks. In order to meet this challenge, commercial banks may seek other ways to increase income, such as increasing income from intermediary business and expanding investment business.
4. Impact on monetary policy: Lowering deposit interest rate is usually a means for the central bank to adjust monetary policy. Lowering the deposit interest rate may stimulate consumption and investment, thus promoting economic growth. However, over-reliance on this policy tool may lead to an increase in inflationary pressure.
5. Impact on international capital flow: The downward adjustment of deposit interest rate may lead to capital flowing from high interest rate countries to low interest rate countries, thus affecting international capital flow. This may have an impact on the exchange rate market, and then affect import and export trade and economic growth.
It should be noted that the impact of lowering the deposit interest rate varies with different countries, regions and market environments. When interpreting this policy, we need to make a comprehensive analysis in combination with the specific situation.