Inflation Algorithm, Richer Banks Poorer Families: Here’s Why Home Savings Dropped by $25B

With inflation soaring banks are richer while households are poorer. In 2022, the credit institutions of our country totaled, after taxes, 21.8 billion euros in profits, practically 8 billion more than in 2021 (+58 percent). The savings of Italian families, on the other hand, between March last year and the same month this year suffered a reduction of 25.2 billion euros. This was reported by the CGIA Research Office.

This is just one of the many economic effects that has hit our country following the increase in interest rates that has occurred in the last year which, according to the monetary policy decided in Frankfurt, has the objective of bringing down the high prices.

If in June 2022 the main refinancing rate of the European Central Bank (ECB) was equal to zero, starting from next June 21st it will touch the threshold of 4 percent. This means that, compared to 12 months ago, those who today apply for a loan or have a variable rate mortgage have suffered a very significant increase in the cost of money, while ensuring, at the same time, an economic advantage, especially for those who by profession lend money (banks).

Otherwise, the lending interest rates, i.e. those applied to our bank deposits, remained equal to zero. This situation, with almost double-digit inflation, has contributed to eroding our savings. It should also be noted that the surge in inflation has forced many households to draw from savings the sums necessary to face the cost of living. The combined effect of these two economic aspects has lightened the current account of Italians by over 25 billion euros.

There are no miraculous measures to deal with this situation. However, one of the few things that the government could put in place is a redistributive policy that takes something away from the sectors that have made significant extra profits from this scenario (credit, energy, pharmaceuticals, etc.), distributing them, in the form of a reduction in state taxes , to the middle class which has not yet benefited from any reduction in the tax burden. The latter is the only measure that could counter the loss of purchasing power that has occurred since the beginning of 2022.

As we said above, in this last year of record inflation, the bank deposits of Italian households suffered, between March 2022 and the same month of 2023, a “cut” of 25.2 billion euros.

At the regional level, the most significant percentage contractions concerned the northern regions: Lombardy and Liguria (-3.5 per cent), Emilia Romagna (-3.9 per cent) and Piedmont (-4.7 per cent) are the geographical areas where families have suffered the most significant erosion. At the provincial level, however, the most affected families reside in Asti (-8.12 per cent); followed by those of Cuneo (-7.11 per cent), Biella (-6.81 per cent), Rimini (-6.46 per cent), Vercelli (-5.68 per cent) and Lodi (-4.92 per cent hundred). On the other hand, those who have not been affected by this situation are, in particular, families residing in the South, where inflation has grown less than in the rest of the country.