Euro zone money supply dips 10pc
Frankfurt, April 26, 2008
Euro zone money supply growth, a leading indicator of inflation, slowed sharply last month, provisional data from the European Central Bank have showed.
Growth of the ECB's broad M3 measure fell back to 10.3 per cent from 11.3 per cent the previous month, the central bank said, slightly below an average analyst forecast of 10.4 per cent compiled by Thomson Financial News.
Loans to the private sector, a sub indicator watched closely by central bankers, rose by 10.8 per cent last month, down slightly from the February pace of 11 per cent, the bank said.
In November, the M3 indicator, which includes cash, overnight deposits, other short-term deposits, repurchase agreements, shares and units in money market funds and debt securities with a maturity of up to two years, stood at a record high of 12.3pc.
It is a widely-watched indicator of medium-term inflationary trends in the euro zone economy, though experts have increasingly questioned its relevance.
The ECB's three-month moving average for M3 growth, which is less subject to volatility, also eased back however, to 11.1pc during the period from January to last month from 11.5pc in the December-February timeframe.
ECB governors are thus beginning to see signs that euro zone inflation which hit a record 3.6pc in March, might start to ease lower in the coming months.
Euro zone companies and some politicians have pressed the bank to trim its benchmark short-term interest rate of 4.0pc to encourage slumping economic growth, but the bank is mandated to focus first and foremost on fighting inflation.
Sylvain Broyer, an economist at the Natixis brokerage commented on the data by saying: 'The downturn in broad monetary growth is now definitely engaged: a reason less for the ECB to maintain last days' hawkish tone, especially after the surge in Spanish unemployment and the fall in business climate across Europe.'