Eurozone money supply growth slows in June: ECB

The ECB's M3 indicator of money supply rose by 2.1 percent last month, following a gain of 2.5 percent in May, a bank spokesman said.

The central bank had initially estimated the increase in May at 2.4 percent, and analysts polled by Dow Jones Newswires had pencilled in a rise of 2.3 percent in June.

The ECB regards the M3 figure as a key guide to pressures likely to affect inflation in the medium term and bases its interest rate levels in part on the current trend.

The central bank seeks to keep eurozone inflation below but close to 2.0 percent, whereas it stood at 2.7 percent in June.

Meanwhile, the rate of growth in eurozone bank loans to the private sector also declined in June, the ECB said, though a breakdown of the data showed mixed results for businesses and households.

Overall lending increased by 2.5 percent compared with the same month last year, but that was a decline from the 2.7 percent level registered in May.

The figures nonetheless revealed a marked pick-up in loans to non-financial sector, with the rate of expansion climbing to 1.5 percent in June from 0.9 percent the previous month.

"This suggests that banks are becoming more willing to lend to corporates and modestly eases concern that persistently tight credit conditions may hold back corporate activity in many countries," IHS Global Insight chief European economist Howard Archer said.

With the economy showing signs of a slowdown however, it was possible that companies might become more cautious and seek less credit in coming months, he noted.

The rate of lending to households declined slightly meanwhile, though it still showed an expansion of 3.2 percent on the year.

That might be "a sign that consumers are becoming more reluctant to borrow in the current uncertain economic environment," Archer suggested.

Barclays Capital economist Julian Callow felt the aggregate data suggested that monetary and credit conditions "continue to be anaemic," which would argue for ECB rates to remain on hold.

The central bank raised its benchmark interest rate to 1.50 percent last month to contain dogged inflation, but is now expected to keep it stable for the next few months, at least.

Copyright AFP (Agence France-Presse), 2011