Feb. results: +4.7% y/y
+4.8% 3-month average y/y
+9.6% private sector credit growth
+0.7% sa m/m
MNS survey median: +4.4% y/y
+4.8% 3-month average y/y
MNS survey range: +4.2% to 4.9% y/y
+4.7% to 4.9% 3-month average y/y
Jan. results: +4.7% y/y (unrevised)
+4.9% 3-month average y/y (revised from +5.0%)
+10.0% private sector credit growth (unrevised
+0.2% sa m/m (unrevised)
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FRANKFURT (MktNews) - The eurozone annual M3 growth rate wassteady in February at the unrevised 4.7% rate seen in January, exceeding market expectations and remaining above the European Central Bank's (ECB) 4.5% reference value.
At the same time, while the key three-month average of annual M3 money supply growth rates slowed to 4.8 % for the December-February period from 4.9% for November-January (revised down from 5.0%), in line with expectations, it also remained above the ECB's reference value.
As such, while the latest headline M3 figures are not inconsistent with a continuation in the deceleration of money supply growth seen over the past year, they may dampen expectations by some analysts that the ECB could cut interest rates soon, possibly as early as its Governing Council meeting this Thursday.
Indeed, the market had expected that the February M3 rate could fall below the ECB's reference value for the first time since the ECB assumed the monetary policy reins for the 12-nation euro area in January 1999. The median forecast in a Market News International survey of 23 analysts was for the February rate to fall to 4.4%. The median for the 3-month M3 average, at 4.8%, was in line with the figure reported by the ECB.
Senior ECB officials, in addition to citing the slowdown in EMU economic growth, have recently toned down their concerns about lingering inflation risks and pointed to the ongoing slowing of M3 growth. Some analysts had argued that headline M3 growth of 4.5% or less could bring a rate cut by giving the ECB a strong justification for such a move.
However, seasonally adjusted growth in the eurozone M3 aggregate rose strongly in February to 0.7% from 0.2% (unrevised) in January. This development could give the ECB reason to keep interest rates on hold for the time being if it signals that M3 growth might not continue to decelerate as quickly in the months ahead as had been expected.
However, the pick-up in the adjusted rate may also be at least partly explained by poor seasonal adjustments, so that additional data would be necessary for a proper interpretation.
Growth in credit extended to the eurozone private sector slowed further in February, falling to 9.6% from 10.0% in January and 10.2% in December. In the past, ECB officials had cited double-digit growth in private credit as a chief source of concern about inflationary pressures.