Euro area monetary dynamics in September 2025 showed that broad money (M3) growth slowed to 2.8 percent from August's 2.9 percent, with the three-month average to September slowing to 3.0 percent from 3.2 percent in the three months to August, despite improved strengths in marketable instruments (M3M2), which rose from 2.2 percent to 4.0 percent. In contrast, the narrower measure of money supply (M1), which includes cash and overnight deposits, rose slightly to 5.1 percent, indicating sustained short-term liquidity and household confidence in easily accessible funds.

Lending activity also showed mild resilience, as loans to households expanded by 2.6 percent, up from 2.5 percent in August, reflecting gradual improvement in consumer credit conditions. Meanwhile, loans to non-financial corporations slowed slightly to 2.9 percent from 3.0 percent, pointing to persistent corporate caution amid higher borrowing costs and uncertain economic prospects.

In essence, the latest updates reveal a balanced monetary environment where consumer lending is gaining traction. However, corporate borrowing remains restrained, signalling that monetary conditions are supportive yet still constrained by the lagged effects of previous policy tightening. This latest update takes the RPI to 33 and the RPI-P to 52, meaning that economic activities within the Euro area are well ahead of expectations.

Money supply growth expected to slow to 2.7 percent in September from 3.2 percent in August.

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.