Eurozone money supply yet again exceeded the European Central Bank's inflation-fighting target and market expectations with a 7.5 percent increase in June, ECB data showed on Thursday. The data, plus French and Italian reports of rising producer prices, underlined that the ECB is highly unlikely to lower its main interest rate from an already historic low of 2.0 percent in an effort to boost economic activity.
M3 money supply, a measure of easily accessible cash in bank accounts and other liquid short-term investments, grew 7.5 percent in June year-on-year after a 7.3 percent annual rise in May, the ECB said. The less volatile 3-month moving average was up 7.2 percent in June, also higher than May's rate.
"The latest data - along with firming industrial sentiment - are likely to galvanise the hawks at the ECB and deter any remaining doves from wanting to discuss the potential for rate cuts," Barclays Capital said.
Economists polled by Reuters had predicted a rise of 7.1 percent on average for June and read the newest data as further ammunition for the ECB to stick to its guns on rates despite political pressure to cut credit costs further.
German Economy Minister Wolfgang Clement, who has regularly said Germany suffered from too high an ECB rate, said late on Wednesday that interest rates could have been lower for some time. "That would have given growth impetus," he told reporters.
The ECB says M3 increases of more than 4.5 percent generally risk fuelling inflation in future, though economists believe the constant overshoot is partly due to investors' avoiding non-liquid assets in uncertain economic times.
The European Commission recently signalled its intention to cuts its forecast of 1.6 percent economic growth this year in line with the 1.3 percent forecast made recently by euro zone finance ministers at a meeting in Brussels.
Growth in loans to the private sector rose an annual 7.9 percent in June after a May increase that the latest ECB report scaled back to 7.5 percent from the 7.6 percent first announced. The European Commission publishes a preliminary estimate of July consumer price inflation on Friday and economists believe high oil costs will have nudged the eurozone rate up to 2.2 percent from 2.1, above the ECB's 2 percent target.
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