Credit growth to the private sector in the euro zone slowed in July for the 10th consecutive month, fueling speculation about a pause in rate hikes, the European Central Bank said on Monday. Lending to the private sector, adjusted for certain strictly financial transactions, rose 1.6% in a year, the lowest score since June 2016, and continues a slowdown that began in October 2022. Rising rates since July 2022 it leads to the depletion of credit flows to companies and households.
The ECB sees this as proof that its monetary policy decisions are having an effect in calming inflation. The aggregate is down but still reached 5.3% in July in the euro area. Therefore, interest rates should be set “at a sufficiently restrictive level for as long as necessary” to bring inflation to the 2% target, ECB President Christine Lagarde insisted on Friday at the Reserve Forum. US Federal in Jackson Hole, Wyoming.
Next ECB meeting in mid-September
The institution has raised rates nine times in a row since July of last year, bringing the benchmark rate on excess bank deposits to 3.75%. However, at the end of July the ECB opened the door to a possible pause in the coming months, which will depend on the available economic data.
The latest credit data could influence the direction of a pause in rate hikes when the ECB meets again in mid-September. Specifically, loans granted to companies slowed down their growth again in July, to 2.2% year-on-year, the lowest level observed in two years, in a context of sluggish demand. The growth of loans granted to households also slowed to 1.3%, the lowest since November 2016. Housing loans, in particular, are close to stagnating (+0.8%).
Source: BFM TV
