The ECB cuts 25 basis points (0.25%)
In its April 2025 meeting, the ECB cut rates by an additional 0.25%, reducing the deposit facility rate to 2.25%.
It’s worth remembering that central banks lower official interest rates to support economic growth when inflation isn’t a threat.
The inflationary surge that followed the pandemic is gradually moderating, and inflation is once again approaching the 2% target.
Some significant uncertainties remain, including the possibility of an escalation in the trade war, which could have a negative impact on both inflation and economic growth.
Specifically, the ECB has warned of a likely economic slowdown due to the global trade war. This is due to the uncertainty generated by the current situation, which affects the confidence of households and businesses, influencing their consumption and investment decisions.
Discrepancy in monetary policies and caution from the ECB
At recent meetings, the ECB has cut rates while the Fed has kept them steady. Trump harshly criticized Powell for not having cut rates yet.
The European Central Bank has not committed to future rate movements, but at this stage, a pause in rate cuts is likely to assess the economic impact of both the trade war and Germany’s upcoming fiscal stimulus program, which could exert upward pressure on prices.
The Variable Yield of our Euro Savings Portfolios drops to 1.85%.
Our savings portfolios offer returns that accrue at the same rate as official rates less costs: that’s why we call it the variable Yield. The previous variable Yield was 2.10%.
After the reduction, it will drop to 1.85% for the lowest capital level, as we calculate the variable yield for the Savings Portfolio, starting April 21, 2025. The yield, depending on the account size, can increase to 1.90% for amounts over €1,000,000 or to 2.03% for amounts over €5,000,000 (due to the reduction in inbestMe’s management fees).
Important note: At the time of writing, the 0.25% reduction has not yet been reflected in the money market funds used in our portfolio. This is because some assets in the funds’ portfolio still have yields pegged to the previous rates. We have always acted cautiously in communicating related to the variable effective yield calculation. In cases of increases, we do not announce the change until it is actually reflected. Regarding reductions, we prefer to be cautious and announce the reduction in advance, even if it is not yet fully reflected in the money market funds used, in anticipation of what will happen in a few days.
Remember, this is the (variable) IRR you can reasonably expect to earn in a year if rates remain at this level. There are no other adverse effects on the portfolio’s value. The only change is that interest will now accrue at a slightly slower rate. As we have repeatedly stated, the IRR of our Savings Portfolio remains one of the most competitive returns you can find for your immediate savings or emergency fund.
Historically, our Euro Savings Portfolio has had an average return 1.4 times higher than deposit interest rates. Since its launch, the Savings Portfolio has accumulated a 6.6% return compared to the 4.8% that the average one-year deposit would have accrued, a difference of 1.8 percentage points, as shown in the following graph.
Target Portfolios: sets a target return of 9.5% (yield 2.5%)
At inbestMe, the only portfolio focused on immediate savings or emergency funds is the Savings Portfolio, due to its flexibility and low risk.
With the recent ECB interest rate cuts, the yield curve is no longer inverted. This means that market interest rates are higher the longer the term.
For savings that you can invest and commit to a predetermined term, at inbestMe we offer Target Portfolios with maturities in 12/2026, 12/2027, 11/2028, and 12/2028. With a Target Portfolio, you can set a cumulative target return of up to 9.5% and target annualized returns of up to 2.5% in EUR*.
To consider them, first make sure you don’t need the money until that maturity (although withdrawal is flexible, you may not achieve the target return before maturity). A target portfolio is especially useful for investors who have a defined goal within the next few years.
Let’s suppose you need €100,000 to buy a house in four years. In this case, it would be very helpful to have reasonable certainty about the return you’ll get from your portfolio to ensure that these €100,000 will be available when you need them. It wouldn’t be advisable to invest all your money in stocks, as a stock portfolio can fluctuate significantly over time. It would be better to have a target portfolio, where the return can be known in advance. This option would also be more suitable than a traditional bond portfolio, where the return can fluctuate over time. It might even be safer than a savings portfolio, as its IRR is unknown going forward. In the case of a savings portfolio, you would never lose due to a negative change in capital, but you can’t know with certainty at what yield your money will grow in the future.
Bond portfolios (yields up to 3.9%)
If your investment horizon is still short or medium term, but more indefinite, we also offer Bond Portfolios, with yields reaching up to 3.8% in EUR* for the aggressive bond portfolio.
*Important note: These target returns, or yields, were the most recent, calculated on April 1, 2025, and are subject to change. Further details can be found on the portfolio pages. Due to the steepening of the yield curve in recent months, investors with investment horizons longer than one year may find more profitable alternatives to the Savings Portfolios, whose profitability has decreased.
Diversified portfolios of index funds
To invest with a focus on capital accumulation, our index fund or ETF portfolios (10 profiles) combining different fixed-income and equity ratios are ideal for achieving higher returns with very high diversification. The minimum term to consider is 3 years.
Diversified pension plan portfolios
To complement your retirement, our pension plan portfolios are the most suitable.
Remember that their liquidity is limited (retirement, serious illness, disability, or after the age of 10). Currently, only €1,500 per year can be contributed and deducted from the tax base to individual pension plans.
For both reasons, we can decide to complement our retirement goals with index fund portfolios or company pension plans if we have access to them.
