What is inflation?
Inflation is the rate at which prices rise over time. When it is positive, each euro buys a little less than before. The European Central Bank aims for inflation of 2% over the medium term in the euro area.
What do ECB interest rates do?
The ECB sets key interest rates for the euro area. When it raises them, borrowing generally becomes more expensive and saving can pay more. When it lowers them, the effect is usually the opposite. Banks do not pass changes on one-for-one, so compare their offers.
How this affects your mortgage
Variable-rate loans often follow a reference rate such as Euribor, which moves with expectations about ECB policy, so payments can change. Test different rates in our mortgage and loan calculator.
How this affects your savings
If your savings earn less than inflation, their buying power falls. Use our compound interest calculator to see growth at different rates, and remember that the real return is the interest rate minus inflation, before tax.
Practical steps
Keep an emergency fund in an easy-access account, avoid taking on debt you could not afford at a higher rate, and review your savings and loans at least once a year.