The third quarter survey found no change in banks' credit standards for loans or credit lines to enterprises. At zero percent, the balance was down from 3 percent in the second quarter and followed two years of consecutive tightening. For households, standards continued to ease for mortgage lending (minus 3 percent after minus 6 percent) but tightened further for consumer credit (steady at 6 percent). For the current quarter, banks expect a modest net tightening for loans to firms and for consumer credit but a slight net easing for loans to households.

Significantly, the survey also found a rise in firms' net loan demand (4 percent after minus 7 percent) for the first time since the third quarter of 2022. Net consumer credit demand (8 percent after 13 percent) also rose, albeit more slowly than in the second quarter, and net demand for housing loans (39 percent after 16 percent) climbed especially sharply. All three sectors are expected to see positive growth this quarter.

In sum, last quarter's findings again suggest that the effects of earlier monetary tightening are fading and the ECB will note what appears to be a solid recovery in home loan demand. As such, today's report may reduce some pressure on the central bank to cut interest rates again but another 25 basis point reduction is still more than likely on Thursday.

The European Central Bank's quarterly lending survey of around one hundred and forty banks aims to enhance the Eurosystem's knowledge of financing conditions in the Eurozone and so help the central bank to assess monetary and economic developments as an input into monetary policy decisions. The headline number refers to the net percentage of banks that have tightened their credit standards on lending to enterprises. It is designed to complement existing statistics on retail bank interest rates and credit with information on supply and demand conditions in the euro area credit markets and the lending policies of euro area banks. The survey addresses issues such as credit standards for approving loans as well as credit terms and conditions applied to enterprises and households. It also asks for an assessment of the conditions affecting credit demand.

Particularly in the wake of the Great Recession and the Covid-19 crisis, changes in financial market conditions can have a major say in central bank policy, and hence, the level of asset prices. The main focus is the net percentage of reporting banks indicating tightening credit standards or positive loan demand with regards to enterprises, house purchase and consumer credit. An unwanted tightening of standards or undesired fall in lending could prompt a softer monetary stance from the ECB, potentially entailing lower official short-term interest rates and possible efforts to reduce the cost of longer-term loans.