Euro area’s money supply growth likely remained stable in October

Euro area’s M3 money supply growth is expected to have stayed stable in October. On a year-on-year basis, the money supply growth is likely to have slowed down because of a base effect. However, in all, the scenario has remained stable for some time with growth lingering around the 5 percent mark. This is strengthened by the Quantitative easing program that adds EUR 66 billion of government debt securities to the MFI balance sheet every month, noted Societe Generale in a research report.

The overall M3 figures are not really the problem. Credit growth to the private sector has reached 2 percent. However, most of the net flows of loans to companies and households come from banks in the two largest nations, France and Germany. This implies that peripheral banks continue to be in deleveraging mode and that the transmission of monetary policy is not uniform, said Societe Generale.

In the meantime, the CSPP program has urged a rebound in corporate bond issuance since spring, which is a drag on the flow of bank loans to huge companies, added Societe Generale.