FRANKFURT, Could 30 (Reuters) – Euro zone financial institution lending slowed once more in April, supporting the case for cautious rate of interest hikes within the months forward as weak development and surging borrowing prices are already denting demand for credit score, European Central Financial institution information confirmed on Tuesday.
The ECB has raised charges on the quickest tempo on file over the previous 12 months to fight excessive inflation, weakening demand for financial institution credit score and slowing all the things from the housing market to building and client spending.
Lending development to companies within the 20-nation foreign money bloc slowed to 4.6% in April from 5.2% a month earlier whereas family credit score development dipped to 2.5% from 2.9%, with the banking turmoil of March additionally doubtless proving a drag.
“April’s weak financial information provides to a sluggish financial outlook for the remainder of 2023 and gives an argument for the doves on the European Central Financial institution’s coming conferences,” mentioned ING economist Bert Colijn.
Many policymakers and monetary traders nonetheless see one other two ECB fee hikes within the coming months, taking the deposit fee to three.75% by July, however the jury remains to be out on whether or not additional steps shall be wanted.
Whereas headline inflation has come down sharply, underlying value development remains to be accelerating on sturdy demand for providers, a sector usually much less affected by fee hikes.
Banks have already warned they count on to tighten entry to credit score even additional this quarter, responding to greater funding prices and normal warning given sluggish financial development.
The month-to-month stream of loans to households was a mere 2 billion euros in April whereas within the case of companies, it was a adverse 2 billion euros.
Development within the M3 measure of cash circulating within the euro zone in the meantime slowed to 1.9% from 2.5%, coming under expectations for two.1% in a Reuters survey.
Reporting by Balazs Koranyi
Modifying by Francesco Canepa and David Evans
Our Requirements: The Thomson Reuters Belief Ideas.
