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Eurozone Bank Lending Stagnates Amid Economic Recovery Uncertainty

Bank lending to companies and households in the eurozone remained stagnant last month, signaling a delay in the anticipated economic recovery within the bloc, according to data released by the European Central Bank (ECB) on Tuesday.

Eurozone Bank Lending Stagnates Amid Economic Recovery Uncertainty

The ECB, in its efforts to curb inflation, has raised interest rates to historic highs, resulting in a halt in bank lending within a region heavily reliant on such lending as a vital economic driver.

In January, banks saw only a marginal increase of 0.2 percent in their stock of loans to firms, following a revised 0.5 percent increase in December 2023. Similarly, credit to households grew by a modest 0.3 percent last month, marking the slowest pace of growth since 2015, after a revised 0.4 percent uptick in December.


Lending growth has hovered around zero since the autumn, but there are expectations of a gradual recovery in the coming months as the ECB is likely to initiate interest rate cuts.

A recent ECB survey revealed that eurozone banks anticipate a slight rebound in demand for mortgages and corporate loans for the first time in two years, indicating a potential easing in the lending slump. This moderation in lending constraints offers early signs of a potential turnaround in lending activity.

These trends underscore the ongoing challenges faced by the eurozone economy and the delicate balance that the ECB seeks to strike between addressing inflation concerns and supporting economic growth through monetary policy adjustments.



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