Cash & Liquidity Management
Published  4 MIN READ
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Repairing Treasury’s Leaky Bucket

he steady erosion of value caused by corporates stockpiling cash as interest rates remain at record lows is becoming more evident as inflation edges higher. But solutions such as dynamic discounting could staunch the flow of cash from EMEA companies.

US interest rates continue to slowly and steadily edge higher, despite President Donald Trump declaring he’s “not thrilled” with the Federal Reserve’s policy of tightening. American corporations’ profits are at near-record levels and their treasury departments have the added luxury of deciding how best to employ the tax windfall they received earlier this year.

Contrast this picture with that prevailing across the Atlantic, where the European Central Bank’s (ECB) benchmark refinancing rate has been stuck at zero for 30 months and change is unlikely before summer 2019. While the Bank of England in August agreed a modest quarter point hike in its own base rate, that took it to only 0.75% with no further increase expected until after the dust settles from the UK’s expected departure from the European Union.

Unfortunately, for companies across Europe, the Middle East and Africa (EMEA), as the low/negative interest rate era persists, inflation has edged up to 2% and is poised to move higher. Combine higher inflation with a prolonged period of negligible investment returns and businesses are suffering a steady erosion of value.