Growth in eurozone M3 money supply slowed in January while expansion of loans to the private sector was flat, a sign of non-inflationary economic growth ahead that should reassure the European Central Bank.
The ECB reported on Thursday that M3 grew 6.4 percent in January, slowing from a 7.0 percent rise a month earlier. Growth in loans to the private sector stayed flat at 5.5 percent in the month.
"It's very important to note that loan expansion has stabilised. There has been no further acceleration and that in particular should provide comfort to the ECB," said Thorsten Polleit, an economist at Barclays Capital in Frankfurt.
"If you look at the history of credit expansion, current rates between 5-6 percent are very compatible with non-inflationary liquidity generation."
M3 money supply has grown faster than the ECB would like since mid-2001, but the central bank says the surge is due to special factors and should not pose an inflation risk as long as the expansion slowed when the economy built up steam again.
Michael Schubert, an economist at Commerzbank in Frankfurt, said the slowdown was a sign investors were slowly shifting out of highly liquid safe assets to which they had fled during the global stock market downturn in 2000-2001.
"The M3 data bring no new information for the interest rate policy of the ECB. Money supply developments are not affecting interest rate decisions for the moment," Schubert said.