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Eurozone Lending Growth Steady, M3 Rise Fastest In 6 Months: ECB

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Eurozone lending growth maintained its momentum in December, while a measure of broad money rose at the fastest pace in six months, figures from the European Central Bank showed on Monday.

Lending to households rose 3.3 percent year-on-year in December, same as in November. Loans to non-financial corporations increased 4 percent annually in December, also unchanged from November.

The broad money aggregate M3 grew 4.1 percent year-on-year after a 3.7 percent increase in November. Economists had predicted 3.8 percent rise.

The latest pace of growth in M3 was the highest since June, when it rose 4.3 percent. M3 growth averaged 3.9 percent in the three months to December.

Among the M3 components, the annual growth rate of the narrower aggregate M1 that comprises currency in circulation and overnight deposits eased to 6.6 percent from 6.7 percent.

The annual growth rate of short-term deposits other than overnight deposits was minus 0.8 percent versus minus 1 percent in November.

The annual growth rate of marketable instruments rose to 0.6 percent in December from minus 5.8 percent in November.
The robust lending data supports the European Central Bank's claim that the Eurozone is experiencing a slowdown and the risk of recession is very low.

While the ECB's forward guidance now suggests that the first hike would come late this year, some economists now expect the bank to raise interest rates only in 2020 due to the weaker growth and inflation outlook, and the persistent uncertainties linked to global trade and politics.

Results of the latest bank lending survey from the ECB showed that banks expect loan demand growth to ease further in the first quarter of this year, suggesting that the economy may not profit as much from increased investment, ING economist Cartsen Brzeski said.

"Even though rates remain favorable and credit standards have eased in recent quarters, uncertainty is unlikely to make lending the engine of the growth recovery in the coming months," Brzeski said.

"Lending growth is simply not providing the oomph that the eurozone needs to get out of its slow growth rut."

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