Growth of the euro-zone money supply, which the European Central Bank (ECB) views as a key indicator of future inflation, held steady in August in line with analysts' expectations, according to ECB data published yesterday.
The ECB calculated that M3 money supply grew by 7.1 per cent on a 12-month basis in July, the same rate of change as in June.
M3 covers cash, overnight deposits, other short-term deposits, repurchase agreements, shares and units in money market funds and debt securities with a maturity of up to two years, and is the ECB's preferred indicator of medium-term inflationary trends.
But because the monthly figures are subject to volatility, the ECB also calculates a three-month moving average for M3 growth, which stood at 7.3 per cent in the period from May to July, compared with 7.4 per cent in the period from April to June.
Both the figures are still far higher than the ECB's target of 4.5 per cent for M3 growth this year.
However, a sharper-than-expected slowdown in M3 growth in June and the fact that M3 growth remained under control in July could help take the heat off the bank to tighten monetary conditions at a time of renewed financial market uncertainty.
A closer look at the development of the different components of M3 showed the annual rate of M1 growth, which comprises currency in circulation and overnight deposits, picked up to 7.6 per cent in July from 6.9 per cent in June. - (AFP)
