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28 Nov 2013
Continued freeze of Eurozone lending could push the ECB to act
FXstreet.com (London) - Another round of disappointing bank lending figures released today could push the European Central Bank to pursue further non-traditional policies to attempt to boost lending.
Eurozone M3 money supply growth declined 1.4 percent in October year-on-year, down from 2 percent in September, falling a long way short of consensus market expectations. Bank lending to the private sector contracted by 2.1 percent year-on-year in October following a 2 percent drop in September.
There was some good news in the lending to government numbers, with the growth rate at 0.8 percent compared to 0.7 percent, an indication of limited deterioration in overall government finances.
Non-adjusted loans to non-financial corporations fell 3.7 percent year-on-year in October. This follows the 3.6 percent contraction in September.
Eurozone mortgage lending increased 0.9 percent year-on-year in October, from 0.8 percent in September.
All in all, the lending figures paint a pessimistic picture of the health of the European economy, with little suggest an upswing in the credit cycle through the fourth quarter.
The ECB moved to cut the main refinancing rate earlier this month by 25 basis points to 0.25 percent – a record low. There has also been speculation that the ECB might move to implement negative deposit rates in an attempt to incentivise banks to lend, however, rumours have been stamped out by ECB officials as quickly as they have appeared.
A possible move from the ECB may be to mimic the Funding for Lending scheme that the Bank of England today announced that it would be cutting back due to inflationary pressures in the housing market. With rates cut to the bone with little effect on Eurozone credit activity, European policymakers are close to emptying their bag of monetary tricks, which will only serve to enhance speculation as we approach the next meeting of the ECB governing council in Frankfurt on 5 December.
Eurozone M3 money supply growth declined 1.4 percent in October year-on-year, down from 2 percent in September, falling a long way short of consensus market expectations. Bank lending to the private sector contracted by 2.1 percent year-on-year in October following a 2 percent drop in September.
There was some good news in the lending to government numbers, with the growth rate at 0.8 percent compared to 0.7 percent, an indication of limited deterioration in overall government finances.
Non-adjusted loans to non-financial corporations fell 3.7 percent year-on-year in October. This follows the 3.6 percent contraction in September.
Eurozone mortgage lending increased 0.9 percent year-on-year in October, from 0.8 percent in September.
All in all, the lending figures paint a pessimistic picture of the health of the European economy, with little suggest an upswing in the credit cycle through the fourth quarter.
The ECB moved to cut the main refinancing rate earlier this month by 25 basis points to 0.25 percent – a record low. There has also been speculation that the ECB might move to implement negative deposit rates in an attempt to incentivise banks to lend, however, rumours have been stamped out by ECB officials as quickly as they have appeared.
A possible move from the ECB may be to mimic the Funding for Lending scheme that the Bank of England today announced that it would be cutting back due to inflationary pressures in the housing market. With rates cut to the bone with little effect on Eurozone credit activity, European policymakers are close to emptying their bag of monetary tricks, which will only serve to enhance speculation as we approach the next meeting of the ECB governing council in Frankfurt on 5 December.