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Lending to euro zone businesses slowed in early weeks of Ukraine war -Breaking

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© Reuters. FILE PHOTO – Buildings can be seen at Canary Wharf, London during the Coronavirus Disease (COVID-19) outbreak, in London, Britain, January 27, 2021. REUTERS/Peter Cziborra

FRANKFURT, (Reuters) – Bank lending to businesses in the euro area slowed in March. This reflects fears that Russia’s invasion of Ukraine will prompt banks and corporations alike to be cautious, according to data released by the European Central Bank on Friday.

As the conflict in Ukraine is threatening confidence, policymakers worry that banks may tighten credit access, which could weigh on an already stagnant economy.

From 4.5% in February, the growth rate of lending to business declined to 4.2% in March. This is still in line with preCovid trends.

In the meantime, lending to households increased to 4.5% (from 4.4%), its highest rate since 2008.

The M3 measurement of the money circulating in the euro area grew 6.3%. This was the slowest rate in 2 years – this is prior to the ECB increasing its bond purchases in response to the coronavirus pandemic.

The ECB’s Quarterly Lending Survey already indicated to banks that they intend to reduce access to credit for the second quarter, even though demand was expected to increase.

Despite the record-breaking inflation, the ECB seems certain that it will cut its stimulus even further at its next meeting on June 9th. This would mean ending the bond buying program in July, and signaling a rate increase in the third trimester.

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