The annual growth rate of M3 slowed from a downwardly revised 3.1% Y/Y to 2.5% Y/Y, while the consensus was looking for a further acceleration to 3.4% Y/Y. The details show however that the decline was almost entirely based in overnight deposits, which dropped by €57 billion compared to the previous month. This might be related to Greek banks.
After the ECB’s 3-year LTRO’s M3 money supply sharply picked up, but now there seems to be some normalization.
Turning to the lending data, loans to the private sector slowed further (0.3% Y/Y from 0.6% Y/Y), but this was due to a sharp decline in loans to non-monetary financials. Loans to non-financials, on the contrary, picked up, accelerating from 0.3% Y/Y to 0.5% Y/Y, as they rose by €10 billion from March. Loans to households rose by €7 billion from the previous month, while the annual rate slowed from 0.6% Y/Y to 0.5% Y/Y.
Overall, the lending data are not too bad as both loans to households and non-financials increased slightly. The slowdown in the annual growth rate of M3 suggests that inflationary pressures remain very limited. If today’s euro zone inflation data would surprise on the downside too, it might ease resistance within the ECB to cut rates further.