Further tightening in credit standards and weakening loan demand from households and businesses in the euro area suggest that the monetary transmission is in play in the real economy, which could prompt the European Central Bank to hit a pause on rate hikes in the coming months though the prospect of high inflation could damp such thoughts.
Results of the January Bank Lending Survey from the ECB, released on Tuesday, revealed a substantial further tightening of credit standards for loans or credit lines to enterprises in the fourth quarter of 2022.
Last week, ECB data showed that the annual growth rate of credit to the private sector - both businesses and households, moderated in October.
"For the ECB, the decline in bank lending for December and the bank lending survey for January together indicate that we see transmission at work now, months ahead of its expected peak in the policy rate," ING economist Bert Colijn said.
by Jyotsna V
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