Skip to main content

Tighter monetary policy starting to bite

The latest business surveys suggest that the euro-zone will stagnate or suffer only a mild recession, but the money and credit data paint a much gloomier picture. Net lending was negative in December and lower than in any month since 2014, when the economy and banks were still recovering from the euro-zone crisis. And the private sector credit impulse, which puts lending on a comparable basis with economic growth, points to steep declines in GDP. With interest rates set to keep rising, we expect further weakness in the credit data to signal that the euro-zone entered a recession at the start of this year. Nonetheless, with core inflation at a record high of over 5% in January and set to remain high for many months, we think the ECB will raise its deposit rate to a peak of 3.5% in the coming months.

Become a client to read more

This is premium content that requires an active Capital Economics subscription to view.

Already have an account?

You may already have access to this premium content as part of a paid subscription.

Sign in to read the content in full or get details of how you can access it

Register for free

Sign up for a free account to gain:

  • Unlock additional content
  • Register for Capital Economics events
  • Receive email updates and economist-curated newsletters
  • Request a free trial of our services

Get access