Eurozone businesses start to feel benefit of super-low rates
THE INTEREST rate paid by businesses on new loans fell in the final month of 2013, the European Central Bank (ECB) said yesterday, as the market continues to improve.
New floating rate three-month loans of over €1m (£828,000) saw the cost fall five basis points on the month to an average of 2.18 per cent.
A similar effect was felt by smaller firms.
The rate on loans of up to €250,000 fell by three basis points to an average interest rate of 4.53 per cent. The ECB has previously worried its ultra-low rates were not reaching businesses, a concern which is now easing as the cheap funds make it through to borrowers.
Long term loans – those of around 10 years – saw no change.
As the effect of lower market rates is felt, analysts do not expect a further cut to ECB interest rates just yet.
That is also backed up by rising inflation, easing some fears of deflation on the continent.
Producer prices in the currency area increased 0.2 per cent in the month to December, in contrast to the 0.1 per cent fall in November and 0.5 per cent fall in October.
“We believe the ECB is likely to eventually enact a Long-Term Refinancing Operation (LTRO), which may very well be tailored specifically towards bank lending to businesses,” said IHS Global Insight’s Howard Archer.
“ECB President Mario Draghi has indicated that if there was another LTRO, the ECB would want to make sure that it was not hoarded by banks or used to buy government bonds which largely happened with the two previous LTROs.”