Euro zone banks see rising loan demand despite trade standoff, ECB survey shows
Bank lending, the primary source of finance for businesses, has been slowly recovering for the past year as the ECB has cut interest rates quickly, and firms remained relatively upbeat about their prospects despite a trade standoff with the United States.
"Loan demand was supported by declining interest rates, but dampened by global uncertainty and trade tensions," the ECB said based on a quarterly survey of 155 lenders.
The ECB is all but certain to keep interest rates unchanged on Thursday but will keep the door open to further easing later this year, and markets still expect one more rate cut before the bank is done lowering borrowing costs.
Credit standards - banks' internal guidelines or loan approval criteria - were unchanged for firms last quarter, despite earlier expectations for a modest tightening, and lenders see little change in the current quarter.
While perceived risks related to the economic outlook continued to contribute to a tightening of credit standards, banks reported no specific additional tightening related to geopolitical uncertainty and trade tensions, the ECB added.
Credit standards tightened in commercial real estate, manufacturing, wholesale and retail trade and construction, while they eased slightly across most services.
Demand for housing loans continued to increase substantially last quarter and banks see a further rapid increase in the third quarter, the ECB added.
Credit standards for mortgages tightened slightly but banks see a modest easing in the current quarter, the ECB added.
In consumer credit, there was a more pronounced tightening of standards last quarter and banks see further tightening ahead.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
an hour ago
- Reuters
BOJ may paint less gloomy view, signal rate-hike resumption
TOKYO, July 28 (Reuters) - The Bank of Japan is set to hold off raising interest rates on Thursday but may offer a less gloomy view on the outlook after Tokyo's trade agreement with the U.S. last week, signalling rate hikes may resume later this year. Receding global trade tensions following Sunday's agreement between the U.S. and the European Union add relief for BOJ policymakers on the outlook of Japan's export-heavy economy. But the BOJ is likely to warn of lingering uncertainty on how U.S. tariffs affect business activity with the hit to exports seen intensifying later this year, analysts say. "It's very big progress that reduces uncertainty for Japan's economy - but obviously, some uncertainty remains," BOJ Deputy Governor Shinichi Uchida said last week on the Japan-U.S. trade deal. Uchida noted questions around how soon Washington strikes trade deals with other countries, how the tariffs affect domestic and global economies and how long it could take for the tariffs' effects to be seen in hard data. At the two-day meeting ending on Thursday, the BOJ is widely expected to keep short-term interest rates steady at 0.5%. Markets are focusing on the bank's quarterly outlook report and Governor Kazuo Ueda's post-meeting news conference for clues on the timing of the next rate hike. A Reuters poll, taken before last week's Japan-U.S. trade deal announcement, showed a majority of economists expect the BOJ to raise rates again by year-end. In the quarterly report, the BOJ is likely to revise up this fiscal year's inflation forecast due to persistent rises in rice and other food costs, sources have told Reuters. The BOJ may also tweak its current view that risks to the price outlook were skewed to the downside, and offer a less gloomy view on the economy compared with the current one focused on tariff-induced risks, according to separate sources. The board is likely to maintain its view that inflation will durably hit its 2% target in the latter half of its three-year projection period running through fiscal 2027, they said. In current projections made on May 1, the BOJ projects core consumer inflation to hit 2.2% in fiscal 2025, before slowing to 1.7% in 2026 and 1.9% in 2027. Japan struck a trade deal with President Donald Trump last week that lowers U.S. tariffs for imports of goods including its mainstay automobiles, easing the pain for the export-reliant economy and clearing a key hurdle for further BOJ rate hikes. The positive development contrasts with the gloom that surrounded the economy on May 1, when the BOJ produced its current estimates amid heightened market volatility caused by Trump's April announcement of sweeping "reciprocal" tariffs. The BOJ exited a decade-long, massive stimulus last year and raised its short-term policy rate to 0.5% in January on the view Japan was progressing towards durably achieving its price goal. With rising food costs hurting households and keeping inflation above its 2% target for three years, some hawkish board members have highlighted mounting price pressures that could justify resuming rate hikes.
Reuters
2 hours ago
- Reuters
Samsung Elec signs $16.5 billion contract to supply semiconductors
SEOUL, July 28 (Reuters) - Samsung Electronics ( opens new tab said on Monday it has signed a contract valued at $16.5 billion to supply semiconductors to a major global corporation, in a regulatory filing. It did not name the counterpart. Samsung Electronics declined to comment on the contract. ($1 = 1,383.6800 won) ($1 = 1,383.6800 won)
Daily Mail
6 hours ago
- Daily Mail
ALEX BRUMMER: Bank fears Farage turmoil in No 10
As a public figure, the governor of the Bank of England Andrew Bailey receives most attention from consumers and businesses alike for his role in setting interest rates. Critical as that is to national wellbeing, it has long been my belief that Bailey is more comfortable with the Bank's other, less discussed role of maintaining financial stability. Bailey was first to the battlements in his early days in office in March 2020 as the pandemic shut down Britain and much of the world. Bond markets in New York were in panic, and the Bank, led first by Mark Carney and then Bailey, moved to calm events. A currency swap deal with the US was activated, interest rates were cut to the bone and more money printing, through quantitative easing, was authorised. Bailey passionately urged government to take steps to prevent scarring to the economy. He was also at the tiller in the autumn of 2022 when Liz Truss's tax-cutting mini Budget sparked a run on the pound and a sudden retreat from British government bonds. The scale and suddenness of the move caused ructions for pension funds which had used derivative products to gamble on returns. The episode had threatened, without Bailey's intervention, to cause a cascade of financial collapses among banks who had provided credit for the trades. The Bank of England became a butt of criticism, not least on these pages. Its twice-yearly Financial Stability Report had in the past warned of the potential danger of liability driven-investment products (LDIs) but neither the Bank nor the Pensions Regulator addressed the matter. It is one thing for the Financial Stability Committee to identify and warn of dangers to the financial system, but quite another to tackle a weakness and close it down. Bailey was in the Bank's engine room in the Great Financial Crisis of 2008, so has vast experience of dealing with fractures in the financial system and knows how rapidly contagion takes place. All this experience tells him that Chancellor Rachel Reeves' efforts to encourage growth, by deregulating the City, could be a huge error. It is a reminder of the light touch regulation in the run-up to the collapse of Northern Rock in 2007 and the crisis which followed. Readers of this month's Financial Stability document would find few clues to what Bailey believes is the most acute concern at present. It is not Trump tariffs or the present Government's borrowing needs, as serious as they may be. The governor's biggest worry is political uncertainty. It may seem mad to think that this should be the case given Labour's vast Commons majority and four more years in office. The significant statistic is that Nigel Farage's Reform UK has led the other parties in 65 consecutive polls. And the present kerfuffles in Epping and the record small boat arrivals in a long hot summer make the potential for a Farage journey to Downing Street ever more credible. Bailey and the independent Bank never indulge in party politics. But for the governor, pound sterling, the bond markets and the whole stability of the financial system, the number one threat is a big-spending populist released into Downing Street. Reach for the safety straps.
