The ECB lowers official rates by 0.25%, the Savings Portfolio EUR to 2.10%

At its recent meeting on March 6, the ECB (European Central Bank) cut interest rates again by 0.25%. The deposit facility rate was reduced to 2.5%, which is a total reduction of 150 basis points (1.50%) from the peak of 4% (September 2023).

The decision was widely anticipated. Interest focused on the future direction of the central bank’s policies, especially in view of discussions on new large-scale infrastructure spending programmes in Germany and the possibility of European rearmament, which could mobilise up to 800 billion euros.

Debt-financed investments are expected to flow into the economy, potentially producing a positive effect on growth and reviving upward pressure on prices. These developments may therefore affect the future development of interest rates.

The most relevant message of the ECB’s communication was that monetary policy is now considered “significantly less restrictive” following the cuts made.

If monetary policy is seen as much less restrictive, it means that there is less need to continue cutting rates to make it neutral. Thus, without committing itself, the ECB has opened the door to a pause in rate cuts, which would be appropriate at this time, given the new expansionary fiscal policies that governments are discussing these days.

It is worth noting that the Federal Reserve has also paused rate cuts for now to better assess the impact of the new economic policies implemented by Trump.

The Yield (Variable) of our Euro Savings Portfolios drops to 2.10%

Our savings portfolios offer a return that accumulates at the same rate as the official rates minus costs: that is why we call it variable Yield. The previous (variable) Yield was 2.35%. After the cut, it will drop to 2.10% for the lowest capital level, as we calculate the variable Yield of the Savings Portfolio, as of 03/10/2025. The Yield depends on the volume of the account, which can increase up to 2.15% for amounts over €1,000,000 or 2.28% for amounts over €5,000,000 (due to the effect of the reduction in inbestMe 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 fund portfolio still have yields linked to the previous rates. We have always acted cautiously in communication related to the calculation of the variable effective Yield. In cases of increases, we have not announced the change until it is actually reflected. Regarding reductions, we prefer to be cautious and announce the decrease 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 that this is the (variable) IRR that can reasonably be expected to be earned in one year if rates remain at this level. There are no other adverse effects on the value of the portfolio. The only change is that interest will now accrue at a slightly slower rate. As we have repeatedly published, the IRR of our Savings Portfolio remains one of the most competitive returns you can find for your immediate savings or your emergency fund. Historically, our Euro Savings Portfolio has had an average return 1.5 times higher than the interest rates on deposits. Since its launch, the Savings Portfolio has accumulated a return of 6.4% compared to the 4.6% that the average deposit would have accumulated in one year, or a difference of 1.8 percentage points, as can be seen in the following graph.

Target Portfolios: sets a target return close to 10% (Yield 2.6%)

At inbestMe, the only portfolio focused on immediate savings or emergency funds is the Savings Portfolio, due to its flexibility and low risk.

For savings that you can invest and commit to for a predetermined period, inbestMe offers Target Portfolios with maturities of 12/2026, 12/2027, 11/2028 and 12/2028. With a target portfolio you can set a cumulative target return of up to 9.9% and target annualized returns of up to 2.6% in EUR*. To consider them, make sure that you do not need the money until that maturity (although withdrawal is flexible, you may not obtain 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 say you need 100,000 euros to buy a house in 4 years. In this case, it would be very useful to have a reasonable certainty about the return you will get from your portfolio to ensure that this 100,000 euros will be available when you need it. It would not be advisable to invest all the money in shares, since a share portfolio can fluctuate a lot 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, since the IRR of the portfolio is unknown in the future. In the case of the savings portfolio you would never lose due to a negative change in capital, but you cannot know with certainty at what IRR your money will grow in the future.

Bond portfolios (Yield up to 3.8%)

If your investment period is still short or medium term, but more indeterminate, 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 are the latest calculated on 28/02/2025 and are subject to change. You can see more details on the pages corresponding to each portfolio. Due to the increase in the yield curve in recent months, investors with investment horizons of more than one year may find more profitable alternatives than the Savings Portfolios, whose profitability has decreased.