Credit granting in the Eurozone slightly increased
Banks in the Eurozone's Business Lending Picks Up Speed with ECB's First Interest Rate Cut.
In June, banks in the Eurozone granted 0.7% more loans to companies than before the deadline, as the European Central Bank (ECB) announced in Frankfurt on Thursday. In May, the increase was only 0.3%. However, the growth in loans to private households remains modest. Banks granted only 0.3% more loans to households in June than a year ago. In May, the increase was also 0.3%.
The ECB lowered interest rates for the first time since almost five years in early June. However, the monetary policy makers paused at their following meeting last week and left the interest rate decisions unchanged. For their first meeting after the summer break in September, ECB President Christine Lagarde kept all doors open. Currently, the interest rate that banks receive from the central bank for excess funds they hold is 3.75%. From the perspective of monetary policy makers, this is still a level that restrains the economy. The ECB raised interest rates to curb inflation.
M3 money supply grew by 2.2% within a year in June. Economists had only expected a plus of 1.8%. In May, the growth was 1.5%. M3 includes cash, deposits on checking accounts, and money market papers and bonds. From the perspective of economists, the monthly figures on the growth of the money supply provide insights into inflation development in the Eurozone. However, the relationship between money supply and inflation is considered complex.
After the ECB's first Interest Rate Cut in early June, credit granting by Eurozone banks to companies significantly increased, recording a 0.7% growth in loans. In the Europa Room during the announcement, the European Central Bank revealed this boost in credit granting following the rate reduction.
