The broad monetary aggregate, M3, slowed modestly to 3.6 percent in March, while it averaged 3.73 percent over the last three months, about 0.4 percent below the consensus and driven by declining contributions from short-term deposits and marketable instruments. In contrast, the narrower M1 aggregate rose to 3.8 percent, suggesting increased liquidity preference, primarily through currency and overnight deposits. Lending activity gained momentum, with adjusted loans to households and non-financial corporations rising to 1.7 percent and 2.3 percent, respectively, hinting at gradually improving credit demand.

Meanwhile, deposits from households remained steady, but corporate deposits declined, possibly reflecting tighter cash flows or reallocation strategies. Investment funds showed a sharp uptick in deposit growth, potentially signalling repositioning in response to evolving market expectations. On the asset side, net external assets and private sector claims softened slightly, though they remain the key drivers of M3 growth.

Despite stable total claims on euro area residents, subdued growth in government borrowing indicates fiscal caution. Overall, the monetary landscape points to cautious optimism, with resilient household credit activity and liquidity holding firm even as broader aggregates ease, taking the RPI and the RPI-P to minus 3 respectively. Meaning that economic activities are within the expectations of the euro area economy.

Forecasters see money supply growth at 4.1 percent in March versus 3.8 percent in February.

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.