Euro-zone Monetary Indicators point to slowing economic recovery, add pressure on ECB to loosen policy

Data released earlier today showed that euro-zone broad money (M3) growth picked-up from 4.7% y/y in December to 5.0% in January, a little stronger than the consensus forecast. Euro-zone broad money growth (M3) showed improvement despite a slowdown in narrow money (M1) growth, from 10.8% to 10.5%. However, broad money growth is still slow by past standards and suggests that the ECB might struggle to hit its inflation target.

Meanwhile, bank lending growth remained slow and added to the other evidence that the euro-zone's economic recoveryis slowing. That said, ECB's latest Bank Lending Survey showed that the demand for, and availability of, credit has risen, which is an encouraging sign. However, there is a risk that banks could raise the interest rates on lendings in an attempt to boost their profitability. 

"The ECB is likely to cut rates in March. Investors expect at least another 10bp cut," said Capital Economics in a report.