Euro credit drop keeps Draghi under spotlight

EUROZONE lending is still falling despite the modest recovery in the region’s growth, raising further questions about whether the European Central Bank (ECB) will ease policy again in the near future.

Loans to the private sector dropped 2.2 per cent in the year to March, little changed from the 2.2 per cent and 2.3 per cent falls recorded in February and January. The figures show that even with signs of moderate growth in the currency bloc, lending is still failing to follow.

Money supply figures also came in below expectation. M3, a measure of the amount of money in the economy, grew by only 1.1 per cent in the year to March. The growth is lower than the figures for January and February, and far below the 4.5 per cent that the ECB once targeted.

The dreary statistics were compounded by reports that ECB president Mario Draghi told German politicians that a quantitative easing programme was unlikely for the time being, according to Bloomberg.

German inflation figures released yesterday also came in below consensus: the country’s harmonised index of consumer prices has risen by only 1.1 per cent in the last year, less than the 1.3 per cent expected.

“Barring any further marked near-term rise in the euro, it currently looks unlikely that the ECB will take any stimulative action before its June meeting and it is far from certain that the bank will act then,” said Howard Archer, at IHS Global Insight.