Bert Colijn
ING Economic and Financial Analysis
January data confirms a very cautious trend of recovery in bank lending. This suggests that declines are behind us, adding to our expectations that the ECB is in no rush to cut interest rates.
The cautious recovery of bank lending continued in January. While bank lending to non-financial corporates ticked down slightly, growth was still slightly above 0.1% month-on-month for the third month in a row. For households, the trend is also positive again. The very small increase of 0.04% month-on-month was better than in December, with August having been the last month of negative growth in bank lending to households. Broad money (M3) ticked down in January but remains well above its August 2023 trough.
The question is how quickly this will translate to stronger investment data. Here, there is less reason to be upbeat. The improvements in lending are only small and the ECB bank lending survey suggests that businesses are not yet borrowing for investment purposes. This leads us to believe that subdued investment is likely for the foreseeable future, but if the current trend in bank lending continues, there could be improvements in the second half of the year. Especially given the easier monetary policy that is expected for the second half of 2024.
For the European Central Bank, today’s data confirms that the worst impact of higher rates on bank lending and money growth seems to be over. This means that there is no immediate reason to rush towards rate cuts. We therefore remain comfortable that the ECB will not cut in the coming two meetings, sticking to our call of a first cut in June.
Read the original analysis: Eurozone bank lending on a trend of very cautious recovery
Content disclaimer: This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more here: https://think.ing.com/content-disclaimer/
Recommended Content
Editors’ Picks
EUR/USD stays below 1.1100, looks to post weekly losses
EUR/USD continues to trade in a narrow range below 1.1100 and remains on track to end the week in negative territory. Earlier in the day, monthly PCE inflation data from the US came in line with the market expectation, failing to trigger a reaction.
GBP/USD struggles to find a foothold, trades near 1.3150
GBP/USD stays on the back foot and trades in negative territory at around 1.3150 on Friday. The US Dollar holds its ground following the July PCE inflation data and doesn't allow the pair to stage a rebound heading into the weekend.
Gold retreats toward $2,500 ahead of the weekend
Gold stays under modest bearish pressure and declines toward $2,500 in the American session on Friday. The 10-year US Treasury bond yield edges higher toward 3.9% after US PCE inflation data, causing XAU/USD to stretch lower.
Week ahead – Investors brace for NFP amid Fed rate cut speculation
Here comes another NFP week, with investors eagerly awaiting the results as they try to discern the size and pace of the Fed’s forthcoming rate cuts. The weaker than expected July numbers triggered market turbulence, instilling fears about a potential recession in the US.
Easing Eurozone inflation to back an ECB rate cut in September Premium
Eurostat will publish the preliminary estimate of the August Eurozone Harmonized Index of Consumer Prices on Friday, and the anticipated outcome will back up the case for another European Central Bank interest rate cut when policymakers meet in September.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.