Eurozone corporate lending growth slows as borrowing costs start to bite

25th Sep 2026 12:58

(Sharecast News) - Growth in lending to eurozone businesses slowed in August, according to figures released by the European Central Bank on Friday, offering an early sign that tighter monetary policy may be starting to weigh on credit demand.

Adjusted loans to non-financial corporations rose 4.2% year-on-year in August, down from 4.4% in July, while the monthly flow of new corporate lending slowed sharply to €11bn from €22bn. Lending to households grew 3.1% annually, unchanged from July, with a monthly flow of €19bn.

The figures pre-date the ECB's latest rate increase, which took effect on 16 September, but come against a backdrop of already tighter borrowing conditions. The central bank raised its three key rates by 25 basis points earlier this month, taking the deposit facility rate to 2.50%, after also hiking rates in June.

Higher interest rates typically feed through to more expensive corporate and household borrowing, which can discourage investment and consumption and ultimately slow economic activity.

The figures suggest credit momentum was softening even before the ECB's latest rate increase, although annual corporate lending growth remained relatively robust.

Elsewhere, broad money growth accelerated slightly, with M3 rising 3.5% year-on-year in August after 3.4% in July. However, growth in the narrower M1 measure eased to 2.9% from 3.1%.

The ECB said earlier this month that inflation was expected to remain above its 2% target for an extended period, prompting the latest rate rise despite projecting eurozone economic growth of just 0.9% in 2026.