The growth of loans granted by banks to the private sector rose sharply in April, after a decline in March, the European Central Bank (ECB) said on Friday.
Loans to the private sector, adjusted for certain strictly financial transactions, increased by 5.3% over one year, against 4.6% in March and 4.8% in February, against a background of interest rates at their lowest. In detail, loans to industrial and commercial companies increased by 5.2% over one year in April, an increase of 1.1 points over one month. The growth of loans with a duration between one and five years, supposed to finance investments, particularly accelerated, to 1.9% against a drop of 0.8% last month. Loans granted to households, for their part, maintained an unchanged growth rate of 4.5% in April. On the consumer credit side, the increase was 3.0%, against 2.6% in March, while growth was almost unchanged (5.3%) for loans related to the purchase of housing.
The growth of the M3 money supply, at 6.0%, continues its slow decline while public aid linked to the effects of the Covid-19 pandemic is less in demand. The M3 aggregate is used by the ECB as a leading indicator of inflation, including cash in circulation, loans over two years as well as household and corporate deposits. But the slowdown in the rate of money supply creation did not prevent inflation in the euro zone from reaching 7.5% in April, driven by soaring energy prices against a backdrop of war in Ukraine.
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These levels remain well above the ECB’s medium-term target of 2%, which is supposed to reflect price stability. The guardians of the euro prepared the minds for a first hike in key rates in July and the end of the era of negative rates by the end of the third quarter. The Board of Governors should then decide in June to stop its net debt buybacks before a cycle of key interest rate hikes, the debate between central bankers therefore focusing on the speed and magnitude to be given to this rise.
