The ECB’s tightening of monetary policy between the summer of 2022 and September 2023 continued to have its effects on euro zone bank lending in the fourth quarter of 2023. However, in the absence of a further turn of the screw since September 2023, these effects have not intensified further. Outstanding bank loans to the private sector even accelerated slightly, year-on-year, in the fourth quarter (up 0.5% in December 2023 compared to 0.3% in September) in line with GDP (up 0.1% in the fourth quarter from 0.0% in the third). The credit impulse remains negative but increased slightly for the first time since the ECB began to increase rates in July 2022.

The 157 banks surveyed by the ECB between 8 December 2023 and 2 January 2024 indicated that they had slightly tightened conditions for loans to businesses. The main reasons cited were risk perceptions related to the economic outlook and the situation of firms. The deceleration in business lending outstanding (+0.33% y/y in December 2023, from +3.8% in December 2022) resulted from the delayed effects of cumulative rate rises since 2022 and a fall in demand. The latter particularly affected long-term loans and investment expenditure. Having hit bottom in October 2023, the credit impulse remained negative in December 2023, at -5.9, but showed a recovery compared to the previous months (August to November 2023), due to a largely technical improvement (favourable basis of comparison from late 2022). It is now above the level seen in 2009, in the aftermath of the financial crisis, and closing in on the levels observed in summer 2021 (-5.6 in August 2021).

The banks surveyed indicated that they had also tightened lending conditions for households in the fourth quarter of 2023, to a limited degree for mortgage loans and more significantly for consumer credit. The increase in perceived risk, irrespective of the purpose of the loan, and lower risk tolerance for consumer loans were the main reasons given. Over and above the higher cost of borrowing, weak consumer confidence and the deterioration of real estate market prospects hit demand for credit. In line with the trend that began in the summer of 2022, growth in outstanding loans to households continued to decelerate in the fourth quarter (rising 0.3% y/y in December 2023, from 0.8% in September) whilst the credit impulse for household lending has remained fairly stable since August 2023 (-3.6 in December).

The tightening of monetary policy and the heavy brake applied to outstanding loans to the private sector contributed to the sharp deceleration, beginning in the spring of 2021, and then contraction in year-on-year terms between July and December 2023 of M3 money supply. This contraction, the first since 2009, and more particularly the fact that it has been on a scale (-1.3% in August 2023) not seen since the beginning of the ECB’s retropolated series (1981), has contributed to the fall in underlying inflation. According to the ECB’s preliminary estimate, this measure of money supply more or less stabilised, year-on-year, in January 2024 (+0.1%). Over the same period, core inflation (excluding energy, food, alcohol and tobacco) continued to fall (+3.3%, from +3.4% in December), as did total inflation (+2.8%, from +2.9%).

Download the Full Report!

BNP Paribas is regulated by the FSA for the conduct of its designated investment business in the UK and is a member of the London Stock Exchange. The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty, express or implied, is made that such information is accurate or complete and it should not be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other investment. Information and opinions contained in the report are published for the assistance of recipients, but are not to be relied upon as authoritative or taken in substitution for the exercise of judgement by any recipient, they are subject to change without notice and not intended to provide the sole basis of any evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. No BNP Paribas Group Company accepts any liability whatsoever for any direct or consequential loss arising from any use of material contained in this report. All estimates and opinions included in this report constitute our judgements as of the date of this report. BNP Paribas and their affiliates ("collectively "BNP Paribas") may make a market in, or may, as principal or agent, buy or sell securities of the issuers mentioned in this report or derivatives thereon. BNP Paribas may have a financial interest in the issuers mentioned in this report, including a long or short position in their securities, and or options, futures or other derivative instruments based thereon. BNP Paribas, including its officers and employees may serve or have served as an officer, director or in an advisory capacity for any issuer mentioned in this report. BNP Paribas may, from time to time, solicit, perform or have performed investment banking, underwriting or other services (including acting as adviser, manager, underwriter or lender) within the last 12 months for any issuer referred to in this report. BNP Paribas, may to the extent permitted by law, have acted upon or used the information contained herein, or the research or analysis on which it was based, before its publication. BNP Paribas may receive or intend to seek compensation for investment banking services in the next three months from an issuer mentioned in this report. Any issuer mentioned in this report may have been provided with sections of this report prior to its publication in order to verify its factual accuracy. This report was produced by a BNP Paribas Group Company. This report is for the use of intended recipients and may not be reproduced (in whole or in part) or delivered or transmitted to any other person without the prior written consent of BNP Paribas. By accepting this document you agree to be bound by the foregoing limitations. Analyst Certification Each analyst responsible for the preparation of this report certifies that (i) all views expressed in this report accurately reflect the analyst's personal views about any and all of the issuers and securities named in this report, and (ii) no part of the analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed herein. United States: This report is being distributed to US persons by BNP Paribas Securities Corp., or by a subsidiary or affiliate of BNP Paribas that is not registered as a US broker-dealer, to US major institutional investors only. BNP Paribas Securities Corp., a subsidiary of BNP Paribas, is a broker-dealer registered with the Securities and Exchange Commission and is a member of the National Association of Securities Dealers, Inc. BNP Paribas Securities Corp. accepts responsibility for the content of a report prepared by another non-US affiliate only when distributed to US persons by BNP Paribas Securities Corp. United Kingdom: This report has been approved for publication in the United Kingdom by BNP Paribas London Branch, a branch of BNP Paribas whose head office is in Paris, France. BNP Paribas London Branch is regulated by the Financial Services Authority ("FSA") for the conduct of its designated investment business in the United Kingdom and is a member of the London Stock Exchange. This report is prepared for professional investors and is not intended for Private Customers in the United Kingdom as defined in FSA rules and should not be passed on to any such persons. Japan: This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited, Tokyo Branch, or by a subsidiary or affiliate of BNP Paribas not registered as a financial instruments firm in Japan, to certain financial institutions permitted by regulation. BNP Paribas Securities (Japan) Limited, Tokyo Branch, a subsidiary of BNP Paribas, is a financial instruments firm registered according to the Financial Instruments and Exchange Law of Japan and a member of the Japan Securities Dealers Association. BNP Paribas Securities (Japan) Limited, Tokyo Branch accepts responsibility for the content of a report prepared by another non-Japan affiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited, Tokyo Branch. Hong Kong: This report is being distributed in Hong Kong by BNP Paribas Hong Kong Branch, a branch of BNP Paribas whose head office is in Paris, France. BNP Paribas Hong Kong Branch is regulated as a Licensed Bank by the Hong Kong Monetary Authority and is deemed as a Registered Institution by the Securities and Futures Commission for the conduct of Advising on Securities [Regulated Activity Type 4] under the Securities and Futures Ordinance Transitional Arrangements. Singapore: This report is being distributed in Singapore by BNP Paribas Singapore Branch, a branch of BNP Paribas whose head office is in Paris, France. BNP Paribas Singapore is a licensed bank regulated by the Monetary Authority of Singapore is exempted from holding the required licenses to conduct regulated activities and provide financial advisory services under the Securities and Futures Act and the Financial Advisors Act. © BNP Paribas (2011). All rights reserved.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD stays near 1.0400 in thin holiday trading

EUR/USD stays near 1.0400 in thin holiday trading

EUR/USD trades with mild losses near 1.0400 on Tuesday. The expectation that the US Federal Reserve will deliver fewer rate cuts in 2025 provides some support for the US Dollar. Trading volumes are likely to remain low heading into the Christmas break.

EUR/USD News
GBP/USD struggles to find direction, holds steady near 1.2550

GBP/USD struggles to find direction, holds steady near 1.2550

GBP/USD consolidates in a range at around 1.2550 on Tuesday after closing in negative territory on Monday. The US Dollar preserves its strength and makes it difficult for the pair to gain traction as trading conditions thin out on Christmas Eve.

GBP/USD News
Gold holds above $2,600, bulls non-committed on hawkish Fed outlook

Gold holds above $2,600, bulls non-committed on hawkish Fed outlook

Gold trades in a narrow channel above $2,600 on Tuesday, albeit lacking strong follow-through buying. Geopolitical tensions and trade war fears lend support to the safe-haven XAU/USD, while the Fed’s hawkish shift acts as a tailwind for the USD and caps the precious metal.

Gold News
IRS says crypto staking should be taxed in response to lawsuit

IRS says crypto staking should be taxed in response to lawsuit

In a filing on Monday, the US International Revenue Service stated that the rewards gotten from staking cryptocurrencies should be taxed, responding to a lawsuit from couple Joshua and Jessica Jarrett.

Read more
2025 outlook: What is next for developed economies and currencies?

2025 outlook: What is next for developed economies and currencies?

As the door closes in 2024, and while the year feels like it has passed in the blink of an eye, a lot has happened. If I had to summarise it all in four words, it would be: ‘a year of surprises’.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Majors

Cryptocurrencies

Signatures