While the impact of the flat yield curve and other temporary factors suggest that annual M3 growth continues to overstate the underlying pace of monetary expansion, nonetheless, even after taking such effects into account, a broad-based assessment of the latest data confirms that the underlying rate of money and credit growth remains strong.
Annual M1 growth has continued to moderate in recent months, reflecting higher short-term interest rates which have encouraged further shifts from overnight into time deposits. The moderation in the growth of household borrowing also reflects the dampening impact of higher short-term interest rates, as well as cooling housing markets in several parts of the euro area.