Lending to eurozone firms picks up in January: ECB

FRANKFURT AM MAIN

The pace of growth in lending to eurozone businesses picked up in January, European Central Bank data showed on Feb. 27, in a welcome piece of news for the institution as it eyes an exit from its easy money policy.

Credit to firms grew 3.4 percent year-on-year adjusting for some purely financial transactions, the central bank said, some 0.3 percentage points higher than in December.

Combined with steady 2.9 percent growth in lending to households, overall lending to the private sector expanded by 3.3 percent last month, picking up the pace by 0.4 percentage points.

The ECB is closely eyeing indicators like loan growth as it sketches a path to the exit from years of support to the eurozone economy.

It has set interest rates at historic lows, offered cheap loans to banks and bought tens of billions of euros per month in bonds in a bid to pump cash through the financial system and to businesses and households.

Policymakers hoped the moves would stoke growth and power inflation towards their target of just below 2.0 percent.

But while economic expansion has accelerated in the 19-nation eurozone - hitting 2.5 percent last year according to statistics authority

Eurostat - inflation has remained sluggish, slowing to just 1.3 percent in January.

Governors have been progressively reducing their bond-buying, most recently to 30 billion euros ($37 billion) per month from January, but they want to be sure that economic expansion and inflation’s slow path towards the target will be maintained once they remove their bulwarks.

For now, “the evolution of inflation remains crucially conditional on an ample degree of monetary stimulus provided by the full set of our monetary policy measures,” ECB President Mario Draghi told European Parliament lawmakers Monday.

The ECB must make a decision on its next steps by September, when the program is currently slated to expire.