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Eurozone money supply grew at a slower pace in September and the growth in credit to the private improved from the last year, the European Central Bank reported Wednesday.

The monetary aggregate M3 expanded 7.4 percent year-on-year in September, slower than the 7.9 percent increase in August and the economists’ forecast of 7.5 percent.
In the three months to September, M3 growth averaged 7.6 percent.

The growth in the narrow measures M1, comprising currency in circulation and overnight deposits, held steady at 11 percent in September.

Money growth has slowed this year and is likely to decline further next year, Jack Allen-Reynolds, an economist at Capital Economics, said.

“Meanwhile, although the pandemic has resulted in a huge increase in the money supply, we do not think this will cause inflation to rise because the relationship between the money supply and inflation is very weak,” the economist added.

As regards the dynamics of credit, data showed that the annual growth rate of total credit to euro area residents slowed to 5.6 percent from 5.7 percent. At the same time, credit to general government climbed at a slower pace of 11 percent after rising 12.1 percent in August.

On the other hand, credit to the private sector increased 3.4 percent, faster than the 3.2 percent expansion in August.

Adjusted loans to the private sector gained 3.2 percent versus 3 percent in August. Among the borrowing sectors, loans to households rose 4.1 percent after climbing 4.2 percent. Meanwhile growth in loans to non-financial corporations improved to 2.1 percent from 1.5 percent.


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