The European Central Bank (ECB) reported that the euro area's lending to households rose at the slowest rate since 2015, and broad money supply saw minimal growth in January. Adjusted loans to households increased by 0.3% annually, a slower growth than the 0.4% rise recorded in December, marking the weakest expansion since early 2015.
Similarly, the annual growth rate of loans to non-financial corporations softened to 0.2% from a previous 0.5%, although lending increased for the second consecutive month. Loans to the overall private sector grew by 0.4%, slightly slower than the 0.5% gain in December.
There was a decrease of 0.4% in credit to euro area residents, following a 0.5% drop the previous month. However, credit to the private sector maintained a steady growth rate of 0.4% in January.
The ECB's data revealed that the M3 monetary aggregate expanded by just 0.1% annually, which is less than the revised 0.2% rise seen in December. The M1 narrow measure, encompassing currency in circulation and overnight deposits, dropped by 8.6% from its value a year ago in January, following an 8.5% decrease in December.
However, ING economist Bert Colijn interprets this data to suggest that the more severe effects of higher rates on bank lending and money growth seem to have passed, removing any immediate pressure to lower rates. He anticipates that the ECB will maintain the current rates in its next two meetings and potentially implement the first rate cut in June.
