According to data from the European Central Bank (ECB), the monetary aggregate M3 in the Eurozone grew by 1.9% year-on-year in April (+2.5% in March) to €16.03 trillion. The reading, which was the lowest since July 2014, was slightly below the 2.0% growth rate expected by FactSet consensus analysts.
The ECB also published that bank lending to eurozone households rose by 2.5% year-on-year in April to €6.87 trillion, marking the eighth consecutive month in which the pace of growth in this variable has moderated. Moreover, April’s growth rate is the slowest since April 2017, due to the stagnation of the economy and the decline in demand for credit caused by rapid rate hikes. Meanwhile, credit to businesses grew 4.6% year-on-year in April, its slowest pace since March 2022. In addition, overall private sector credit growth, which covers both households and non-financial corporations, slowed to 3.3% in April, its weakest expansion since September 2021.
Assessment: as the ECB intends with its restrictive monetary policy, the pace of monetary expansion in the euro area is gradually slowing down, which, in theory, should help to combat high inflation. However, it is worth noting that both the monetary aggregate M3 and credit to the private sector continued to grow in April in year-on-year terms.