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27 Nov 2014
Lacklustre Eurozone credit activity – ING
FXStreet (Barcelona) - Research Analysts at ING highlight the credit activity in the Eurozone while stating that the restoring credit supply channel doesn’t guarantee a revival in credit demand.
Key Quotes
“Annual M3 growth in the Eurozone stabilized at 2.5% in October, slightly below consensus.“
“The annual growth rate of credit to the general government stood at -0.1% in October from -0.5% in September, probably reflecting the continuing buying of sovereign bonds by MFIs last month. The gradual easing of credit standards and the low interest rates seem to start having an effect on loan growth, though the monthly flow still remains negative.”
“With the comprehensive assessment of the European banking stress now out of the way without any major casualties, banks might become less inhibited in extending credit to the corporate sector. On top of that, the LTROs and asset purchases by the ECB should keep the cost of the credit at historically low levels.”
“However, while the credit supply channel has now been more or less restored, it doesn’t necessarily guarantee a revival in credit demand, which remained lackluster until now.”
“With the recent European Union investment offensive hardly being the big budgetary boost the Eurozone economy needs, the ECB remains in the driving seat as far as growth stimulus is concerned. However, monetary policy has nearly reached its limits. Barring an unexpected improvement in the underlying economic situation, the ECB is likely to shoot its final arrow in the first half of 2015, namely outright sovereign bond buying.”
Key Quotes
“Annual M3 growth in the Eurozone stabilized at 2.5% in October, slightly below consensus.“
“The annual growth rate of credit to the general government stood at -0.1% in October from -0.5% in September, probably reflecting the continuing buying of sovereign bonds by MFIs last month. The gradual easing of credit standards and the low interest rates seem to start having an effect on loan growth, though the monthly flow still remains negative.”
“With the comprehensive assessment of the European banking stress now out of the way without any major casualties, banks might become less inhibited in extending credit to the corporate sector. On top of that, the LTROs and asset purchases by the ECB should keep the cost of the credit at historically low levels.”
“However, while the credit supply channel has now been more or less restored, it doesn’t necessarily guarantee a revival in credit demand, which remained lackluster until now.”
“With the recent European Union investment offensive hardly being the big budgetary boost the Eurozone economy needs, the ECB remains in the driving seat as far as growth stimulus is concerned. However, monetary policy has nearly reached its limits. Barring an unexpected improvement in the underlying economic situation, the ECB is likely to shoot its final arrow in the first half of 2015, namely outright sovereign bond buying.”