Annual broad money growth remained negative in November but at minus 0.9 percent, the latest reading was up from October's minus 1.0 percent and August's low of minus 1.3 percent. as a result, the headline 3-month moving average rate edged up from minus 1.2 percent to minus 1.0 percent, a little stronger than market expectations.

The reduced pace of decline in the annual rate was largely attributable to narrow money M1 which saw a 9.5 percent drop following a 10.0 percent slide at the start of the quarter. Amongst the M3 counterparts, private sector loans rose 0.1 percent on the year, up from 0.0 percent. After adjustment for loan sales and securitisation as well for positions due to notable cash pooling services, the rate was unchanged at 0.4 percent. Within this, adjusted loans to households (0.5 percent after 0.6 percent) slowed further but to non-financial corporations (minus 0.4 percent after minus 0.9 percent) accelerated for the first time since October 2022.

The November data suggests that overall financial conditions may be beginning to stabilise but remain consistent with a weak economy and so, ultimately, lower ECB interest rates.

Today's report means that the Eurozone RPI and RPI-P open 2024 standing at minus 4. In other words, overall economic activity is moving in broadly line with forecasts and continues to support expectations for ECB easing over the course of the year.

Annual broad money growth (on a 3-month basis) is expected to be unchanged in November at minus 1.2 percent.

M3 is the European Central Bank's (ECB) preferred broad measure of money supply. Since January 1999, the ECB has tended to focus on the 3-month moving average of the annual growth rate to judge underlying M3 trends although the significance of its 4.5 percent reference rate has been downgraded with time. The private sector lending counterpart is usually seen as the most important element of the M3 report.

While other central banks have virtually ignored money supply data, the European Central Bank has not. Thanks to the influence of the Bundesbank in organizing the ECB, M3 money supply was established as one of the 'two pillars' of monetary policy used by the ECB, the other being the harmonized index of consumer prices (HICP). While the target for HICP is two percent, the seemingly largely ignored reference target for M3 growth is 4.5 percent as measured by a three month moving average which is compared with the same three months a year earlier.

M3 measures overall money supply. It consists of M1 which is currency in circulation plus overnight deposits and M2 which include deposits with an agreed maturity up to two years plus deposits redeemable at up to three months' notice. Not all M3 measures are alike. For example, ECB M3 is approximately equivalent to the Federal Reserve's M2 measure. Because an increase in M3 leads to price inflation, this figure can also be indicative of the likelihood of future interest rate hikes.