Eurozone crisis drying up credit to households: ECB
October 26, 2012, 12:03 am TWN
FRANKFURT -- Bank lending to private households in the euro area, which has practically dried up in recent months, contracted again last month in face of the region's crippling debt crisis, data showed Thursday.
Eurozone bank loans to the private sector declined by 0.8 percent in September compared with the same period last year after already shrinking by 0.6 percent the previous month, the European Central Bank said in a statement.
President Mario Draghi has said that weak lending to the private sector reflected a pessimistic view of eurozone growth prospects and heightened risk aversion amid the crisis.
In a bid to boost lending in the embattled 17-member bloc, the ECB offered banks more than 1 trillion euros (US$1.3 trillion) in ultra-cheap long-term loans but the operation appears to have been less effective than Draghi hoped.
The ECB also published eurozone money supply data, which suggest the money supply — a key guide to future inflation — is growing less strongly than expected.
Growth in the M3 indicator, which measures the amount of money in circulation and deposited with banks, slowed to an annual 2.7 percent in September from 2.8 percent in August.
Analysts surveyed by Dow Jones Newswires had expected a pick-up in growth to 3.1 percent.
The ECB regards the M3 figure as a key guide to inflation pressures and uses it to set interest rates accordingly.
Some economists have suggested the bank might cut interest rates some time soon and subdued inflationary pressure makes this more likely.