Eurozone lending to the private sector experienced an accelerated growth rate in December, driven by falling interest rates, while the expansion of the broad money supply slowed, according to data released by the European Central Bank on Wednesday.
Despite tightening credit conditions, adjusted loans to the private sector increased by 2.0 percent, surpassing the 1.5 percent growth observed in November.
Examining specific borrowing sectors, loans to households rose from 0.9 percent in November to 1.1 percent in December. Similarly, loans to non-financial corporations increased by 1.5 percent, up from the previous month's growth rate of 1.0 percent.
Overall claims on the private sector accelerated to a growth rate of 1.7 percent in December, compared to November's rise of 1.3 percent.
Growth in the broad money supply, as measured by M3, registered an annual increase of 3.5 percent in December, decelerating from November’s growth of 3.8 percent. The average growth rate for M3 over the three months leading to December was 3.6 percent.
M1, the narrow measure that includes currency in circulation and overnight deposits, grew by 1.8 percent in December, a slight increase from the 1.5 percent rise seen in November.
According to Jack Allen-Reynolds, an economist at Capital Economics, the ECB data paints a more optimistic picture of the short-term economic outlook compared to recent business surveys, indicating that the effects of the ECB's rate cuts are starting to manifest.
Nonetheless, Allen-Reynolds anticipates significant interest rate cuts by the bank this year.
The European Central Bank is expected to issue its policy announcement on Thursday, with widespread forecasts predicting a 25 basis point reduction in its benchmark rates.
ING economist Peter Vanden Houte anticipates that the ECB will continue its gradual easing approach, arguing that tomorrow's rate cut is warranted to "diminish the degree of restrictiveness."
