Thursday 27 October 2016 12:33 pm

Headache for ECB chief Mario Draghi as lending fails to light up

The European Central Bank (ECB) may be forced to delay winding down its massive bond-buying programme after disappointing figures out from the Eurozone this morning.

Stats on lending published by the ECB showed the amount of cash dished out to households and businesses grew by only 1.8 per cent in the year to September. That was below economists' expectations for a 1.9 per cent expansion, and in line with August's growth rate. 

The ECB is currently buying €80bn a month of government and corporation bonds in its historic quantitative easing programme. The package is designed to let households and businesses to borrow at cheaper rates, and encourage banks to lend more cash – thus targeting both supply and demand. More borrowing should then kick-start spending, supporting growth and pushing up inflation towards the ECB's "below, but close to two per cent target".

The programme is due to end in March 2017, with the ECB currently mulling how it can continue to buy up bonds. Mario Draghi has all but confirmed the buying will not stop in four months, the question is whether he will reduce the amount of monthly purchases, or carry on with €80bn.

Howard Archer, chief economist at IHS Markit said: "The ECB will likely be disappointed overall with the September Eurozone lending data, particularly given that loans to non-financial businesses were only flat.

"Flat loans to businesses … fuels belief that the ECB is more likely than not to take further stimulative action in December."