Teunis Brosens, Research Analyst at ING, notes that the bank lending to Eurozone businesses (adjusted for sales and securitisation) reached 0.6%YoY in January, recovering from its December dip but failing to gain further momentum. Key Quotes “Bank lending to households held steady at 1.4%YoY for the third month in a row. Bank lending growth remains strong in Belgium and France especially. Spain, Portugal and in particular Ireland remain in deleveraging mode. The Netherlands stands out with strong deleveraging in its business sector: bank lending growth to Dutch businesses averaged -6.4%YoY over the last three months. Meanwhile, M1, one of the best leading indicators of the Eurozone business cycle, decelerated to 10.5%YoY from 10.8% previously. This is the fourth monthly decline in a row and the lowest figure since March. M1 growth is clearly moving in the wrong direction, but then again it is still written in double-digits, which keeps the outlook for household consumption positive for at least another two quarters. Today’s Eurozone monetary developments are highly ambiguous. ECB-president Draghi can claim that the recovery of bank lending over the past 1.5 years shows the success of loose ECB policies. During that period, the average cost of borrowing for businesses has fallen by 75bp in the euro area, and even by 100bp in Spain and 140bp in Italy. When the ECB meets in two weeks, the hawks on the Governing Council may argue that now bank lending has been jolted back to live, further monetary action is not necessary and may even prove counterproductive. The doves on the other hand will take the view that a 1-ish% credit growth rate is not enough. They will moreover point to the deceleration of M1-growth to argue that more needs to be done.” For more information, read our latest forex news.