Lending to companies and households in the euro area contracted for a 12th straight month in April as the currency region struggles to leave its longest-ever recession behind.
Loans to the private sector fell 0.9 percent from a year earlier after dropping an annual 0.7 percent in March, the Frankfurt-based European Central Bank said today. Lending declined 0.3 percent from March.
The ECB cut its benchmark interest rate to a record low of 0.5 percent this month after the recession in the 17-member euro area extended to six quarters in the three months through March. While ECB President Mario Draghi said the bank is looking at ways to stimulate lending, policy makers have signaled there’s little that monetary policy can do by itself.
“Over time, as banks get rid of bad loans on their balance sheets, lending could pick up,” said Holger Sandte, chief European analyst at Nordea Markets in Copenhagen. “It’s not a quick development, and the ECB doesn’t have a silver bullet.”
The rate of growth in M3 money supply, which the ECB uses as an indicator for future inflation, rose to 3.2 percent in April from 2.6 percent in March.
M3 grew 3 percent in the three months through April from the same period a year earlier. M3 is the broadest gauge of money supply and includes cash in circulation, some forms of savings and money-market holdings.
“Money and credit growth are very moderate in the euro area,” ECB Executive Board member Joerg Asmussen said in Frankfurt yesterday. Answering concerns that the ECB’s accommodative stance could pose inflation risks, Asmussen added that “we can’t speak of a bubble.”