FRANKFURT, July 24 — The pace of growth in lending to eurozone companies and households held steady in June, European Central Bank data showed today, the eve of a policy meeting expected to offer hints at new stimulus.
Overall, private sector credit growth picked up from 3.3 per cent year-on-year to 3.5 per cent, adjusting for some purely financial transactions.
But all of the increase was down to more borrowing by financial firms, which account for a small fraction of the total in the single currency bloc.
Credit to non-financial companies expanded by 3.8 per cent, while lending to households grew by 3.3 per cent — the same rates as seen in May.
The ECB’s key interest rates are at historic lows, and under a programme of so-called “quantitative easing” it has so far built up a stock of €2.6 trillion (RM11.9 trillion) in government and corporate bonds.
The central bank also plans to offer a new round of cheap loans to banks.
Nevertheless, what president Mario Draghi last month said an “ample degree of monetary accommodation” has not been enough to counteract forces braking economic growth and holding inflation back from the ECB’s target of just below 2.0 per cent.
The headwinds include trade tensions between the US, Europe and China, the threat of a no-deal Brexit and weakness in emerging markets, as well as geopolitical risks like the US-Iran confrontation in the Gulf.
Many observers expect Draghi to hint tomorrow at possible new moves to further boost the eurozone.
The first step could be a cut further into negative territory for the rate banks pay on their deposits.
That would increase the cost to lenders of parking cash with the ECB rather than investing into the wider economy. — AFP
