In the UK at the moment there is a company, Milestone Savings, which is offering a 5 year bond with 3.2% interest. You have to deposit £10,000 - and presumably to get the 3.2% have to keep this in the account for 5 years.
Yet the UK inflation rate for january 2016 was measured at only 0.3%.
Given that this company presumably aims to make a profit, why are they offering such a high rate. Does this indicate that this company is desperate for cash? Or that they think inflation will rise steeply over the next few years and they want to lock people in?
I am wondering what the commercial logic is here?