ECB Rate Increases Lead to First Decline in Business Lending Since 2015

Eurozone credit to non-financial corporations shrank by 0.3% in October, marking the first decline since 2015 and signaling the negative impact of the European Central Bank’s aggressive rate hikes. This contraction in lending reflects a broader economic slowdown in the region, exacerbated by tighter monetary policy. Banks’ rapid repayment of ECB loans is contributing to a significant reduction in the central bank’s assets. The decrease in the broad money supply, M3, further indicates a shift away from credit and an increasing preference for savings. These trends, reflecting a worsening economic environment, are likely to persist into 2024.