By Bahattin Gonultas
BERLIN (AA) - Eurozone lending remained stagnant in July due to persistent high interest rates, according to the latest report from the European Central Bank (ECB).
Corporate loans grew by 0.6% on an annual basis in July, while consumer loans increased by 0.5% compared to the same period last year. Despite these increases, both figures remain modest.
The M3 money supply, which had risen by 2.2% in June, increased by 2.3% year-on-year in July. This growth fell short of analysts' expectations of 2.7%.
"Bank lending data for July indicate that high interest rates continue to suppress borrowing by both businesses and households," said Bert Colijn, ING's Senior Economist for the Eurozone. "Credit growth remains significantly below historical averages, and while the money supply has been recovering recently, it has now stabilized."
Colijn noted that although market rates have decreased slightly, this has not yet led to a notable recovery in lending. "There is no significant relief from the recent drop in market rates, as credit growth remains subdued," he explained.
He added that a modest reduction in interest rates could encourage a slight increase in loan activity. However, with the ECB's gradual rate cuts already anticipated, Colijn is not expecting a substantial rise in borrowing. "It is unlikely that there will be a significant increase in lending as the ECB slowly eases its monetary policy," he said.
*Writing by Sahika Malkoc in Istanbul