The monetary trends in December 2024 present a nuanced shift in financial conditions. The deceleration in the broad monetary aggregate M3 to 3.5 percent from 3.8 percent in November suggests a slowdown in overall liquidity expansion, potentially reflecting tighter financial conditions. In contrast, the narrower monetary aggregate M1 saw a modest uptick to 1.8 percent from 1.5 percent, indicating a slight increase in readily available money, possibly driven by higher consumer spending or precautionary cash holdings.

Meanwhile, credit dynamics point to a gradual resurgence in borrowing. The 1.1 percent growth in adjusted loans to households, up from 0.9 percent, suggests improved consumer confidence or rising demand for personal credit. More notably, adjusted loans to non-financial corporations rose to 1.5 percent from 1.0 percent, indicating a stronger appetite for business investment.

The latest updates between M3 and credit growth emphasise a potential shift from liquidity accumulation toward real economic activity. If sustained, this trend could signal a transition from monetary easing to more targeted credit-driven expansion, influencing future policy decisions. The latest update takes the RPI to minus 13 and the RPI-P to minus 25, meaning that economic activities are well behind market expectations of the Euro Zone.

M3 is seen up 4.0 percent versus 3.5 percent in December.

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.