Awwal 22, 1432 H/Feb 25, 2011, SPA -- Slower money supply growth in the euro zone last month added a note of caution on Friday to the European Central Bank's recent tough talk on price pressures, ramped up by policymakers after inflation topped its target, according to Reuters. While loans to the private sector rose at an annual rate of 2.4 percent, up from 1.9 percent in December, money supply came in weaker than in the previous month, ECB figures showed. M3 money supply, a measure of cash readily available to spend that the ECB sees as a leading indicator for inflation, grew by 1.5 percent on an annual basis, down from 1.7 percent growth in December. The growth rate was well below the ECB's reference rate of 4.5 percent, above which the bank sees dangers to medium-term price stability. The monetary data pointed to the absence of significant price pressures in the 17-nation region, even though ECB policymakers have ratcheted up their anti-inflation rhetoric recently, as prices rose faster than the ECB's target of just below 2 percent. January inflation in the euro zone clocked in at 2.4 percent, mainly due to higher oil and food prices. ECB Governing Council member Yves Mersch, referring to the next ECB staff economic projections, to be released in March, said on Tuesday the 17-country bloc's central bank might move its risk assessment towards seeing upside risks from the current view of balanced inflation risks. But analysts said monetary data should ease their concerns. "The slowdown in M3 growth surely doesn't add additional pressure on the ECB to start worrying about mid-term price risks," Unicredit economist Chiara Corsa said in a note. The ECB figures showed the stock of company loans rose by 24 billion euros in the month, following a 25 billion euro fall in December, leaving them 0.4 percent stronger than the same time a year ago, but economists warned against interpreting this too positively. "The credit numbers look a little bit better but by no means strong," Societe Generale economist Klaus Baader said. "The expansion that was recorded in January was not even sufficient to make up for the outright contraction that occurred in December." Data for lending to home buyers, seen by economists as a potential leading indicator of lending trends, showed mortgage lending increased by 3.9 percent on the year and overall lending to households rose by 3.1 percent.
