Euro region businesses are experiencing an improvement in loan profitability.
With reduced interest rates, Eurozone banks have become more generous in lending corporates. In September, banks disbursed a 1.1% higher loan amount to businesses compared to the previous year, as per ECB data. This figure marked an improvement from the 0.8% growth observed in August. The total money supply, M3, increased by 3.2%, exceeding the 3.0% growth predicted by economists polled by Reuters. M3 encompasses cash, deposits in checking accounts, and securities such as money market papers and bonds. Experts posit that the trajectory of M3 can hint at the path of inflation.
Inflation in the Eurozone dipped to 1.7% in September, falling short of the ECB's desired 2% level. As a result, the central bank lowered its key interest rate for the third time this year. The benchmark deposit rate was reduced by 0.25 percentage points to rest at 3.25%. This adjustment was made mere five weeks after the previous cut.
Analysts anticipate further rate reductions in forthcoming meetings, driven by the decelerating inflation and weakening economic growth in the Eurozone. Central bankers are engaged in discussions over the pace of future interest rate cuts.
The recurrent interest rate reductions by the ECB could be indicative of their long-term monetary policy strategy. The central bank has reduced its key interest rate, which is now recurrently below the 2% level desired for inflation, showing its commitment to stimulate economic growth.
