FRANKFURT, Could 30 (Reuters) – Euro zone financial institution lending slowed once more in April, supporting the case for cautious rate of interest hikes within the months forward as weak development and surging borrowing prices are already denting demand for credit score, European Central Financial institution knowledge confirmed on Tuesday.
The ECB has raised charges on the quickest tempo on file over the previous yr to fight excessive inflation, weakening demand for financial institution credit score and slowing every part from the housing market to building and client spending.
Lending development to companies within the 20-nation forex bloc slowed to 4.6% in April from 5.2% a month earlier whereas family credit score development dipped to 2.5% from 2.9%, with the banking turmoil of March additionally doubtless proving a drag.
“April’s weak financial knowledge provides to a sluggish financial outlook for the remainder of 2023 and gives an argument for the doves on the European Central Financial institution’s coming conferences,” stated ING economist Bert Colijn.
Many policymakers and monetary traders nonetheless see one other two ECB charge hikes within the coming months, taking the deposit charge to three.75% by July, however the jury continues to be out on whether or not additional steps might be wanted.
Whereas headline inflation has come down sharply, underlying worth development continues to be accelerating on strong demand for providers, a sector usually much less affected by charge hikes.
Banks have already warned they count on to tighten entry to credit score even additional this quarter, responding to increased funding prices and normal warning given sluggish financial development.
The month-to-month circulate of loans to households was a mere 2 billion euros in April whereas within the case of companies, it was a destructive 2 billion euros.
Progress within the M3 measure of cash circulating within the euro zone in the meantime slowed to 1.9% from 2.5%, coming under expectations for two.1% in a Reuters survey.
Reporting by Balazs Koranyi
Modifying by Francesco Canepa and David Evans
: .