M3 Growth in Euro Area Shrinks Rate Cut Hopes

Wednesday, June 29, 2005

Hopes for a rate cut to spur the economy in the Euro area got shattered on Tuesday with the release of the latest money supply growth figures. M3 growth accelerated to an annual rate of 7.3 percent in May from 6.8 percent in the previous month, according to a release (pdf) from the European Central Bank (ECB). Loans to the private sector roared ahead at an annual growth rate of 7.6 (7.4) percent. The 3-month average of M3 growth lies now at 6.9 percent and exceeds the target rate of 4.5 percent significantly. M3 growth has been exceeding the target growth rate since May 2001.
ECB president Jean-Claude Trichet has repeatedly said that he considers the high growth rate of M3 as the biggest threat to price stability. The ECB's other big concern are high oil prices which have risen further since Trichet's latest statements about the difficult task of the ECB which prioritizes price stability over economic growth.


Wikinvest Wire