Euro-zone bank lending fell again in January, while cash and liquid deposits fell for the first time as rapid interest rate hikes took a heavy toll, data from the European Central Bank showed on Monday.
The ECB has raised rates at a record pace, by 300 basis points since July, and has promised further action in the hope that rising borrowing costs will curb economic activity enough to contain inflation.
Growth in business loans in the 20-nation currency bloc slowed for the third straight month to 6.1% in January from a 6.3% rise the previous month, while domestic credit growth slowed to 3.6% %, from 3.8%.
Meanwhile, the ECB’s M1 measure of money in circulation plus deposits, a good indicator of future activity, narrowed by 0.7%, the first-ever negative reading.
“The tightening efforts are having a clear effect on money supply and private sector lending, which will have a negative impact on economic growth and inflation in 2023,” said ING economist Bert Colijn. “We view the impact of the high cycle as an underestimated negative for economic activity this year.”
Source: Terra
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