Eurozone corporate lending slowed in first weeks of war in Ukraine

Buildings are seen in the Canary Wharf business district amid the coronavirus disease (COVID-19) outbreak, in London, Britain January 27, 2021. REUTERS/Peter Cziborra

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FRANKFURT, April 29 (Reuters) – Bank lending to euro zone businesses slowed in March, bolstering expectations that Russia’s war in Ukraine will cause banks and businesses to act cautiously, data showed on Friday. of the European Central Bank.

With the war in Ukraine undermining confidence, policymakers are increasingly worried that banks will tighten access to credit, weighing on an economy that is already expected to stagnate, at best, in the first half of the year.

Business loan growth slowed to 4.2% in March from 4.5% a month earlier, still healthy and in line with pre-Covid trends.

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Loans to households meanwhile accelerated to 4.5% from 4.4%, its highest rate since the end of 2008.

The M3 measure of money in circulation in the euro zone rose by 6.3%, the slowest pace in two years – that is, before the ECB increased its bond purchases to respond to the coronavirus pandemic.

In the ECB’s quarterly lending survey, banks have already signaled their intention to limit access to credit in the second quarter, even as demand for funds was likely to increase.

Still, with inflation at an all-time high, the ECB is all but certain to cut stimulus further at its next meeting on June 9, ending bond purchases in July and signaling a rate hike in the third quarter.

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Reporting by Balazs Koranyi Editing by Francesco Canepa

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