In the context of our monetary analysis, substantial excess liquidity has accumulated in the euro area as a consequence of the extended period of high M3 growth. This strong growth has continued in recent months, as economic uncertainty and the low level of interest rates across the whole maturity spectrum have increased the attractiveness of holding liquid assets.
At the same time, the low level of interest rates has helped support recent growth in loans to the private sector. While the large amount of excess liquidity should be less of a concern in a period of moderate economic activity, monetary developments need to be closely monitored in terms of their implications for price stability over the medium to long term.