Lending in the eurozone continued to stagnate in March as consumers lowered their inflation expectations in light of record-high borrowing costs impacting the eurozone’s economy.
Recent European Central Bank (ECB) data reveals that the eurozone’s bank loans to companies saw a marginal 0.4 percent increase in March, compared to 0.3 percent in February. Meanwhile, lending to households reached a new 10-year low of 0.2 percent compared to 0.3 percent in February. Those figures indicated how high interest rates discouraged both borrowers and lenders, which is part of ECB’s strategy to decrease inflation in the eurozone.
A recent ECB survey revealed that eurozone consumers in March cut their inflation expectations for the following year to their lowest since December 2021 at 3 percent. This further highlights that the ECB’s strategy to decrease inflation is working. Meanwhile, inflation forecasts for the next three years remained steady for the 4th month in a row at 2.5 percent.
This data supports the ECB’s plan to start cutting eurozone interest rates in June after inflation falls slightly above its 2 percent target.
The ECB is now cautious of monetary policy becoming too tight. Hence, a tight monetary policy could increase the risk of economic weakness.
Read: Bank of Japan keeps interest rate unchanged, yen hits 34-year low
On a positive note, the amount of money circulating in the eurozone continued to recover in March and saw a 0.9 percent increase, the fastest growth rate since May 2023. This, including recent data, points to signs of recovery or stabilization in the eurozone’s economy.
Although inflation in the eurozone has declined during the last year, ECB’s outlook remains uncertain amid rising energy costs, high services inflation, and geopolitical tensions that could lead to trade disruptions.
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