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Economy in Brief

Money and Credit Trend in Euro Area Remain Robust…
by Robert Brusca February 27, 2008

The table below shows Euro area money and credit growth comparing it to money growth in several key countries. We also provide data on real balances (inflation-adjusted money and credit). Despite ongoing financial turmoil, here data show that there has been little slowing in EMU money and credit. Credit to residents has slowed a touch over the three months compared to six-month and one-year rates. Overall business loan growth in EMU has barely slowed.

Money growth has held up around the various main global money centers as well. Unexpectedly, the growth in real money in EMU has been stronger than in the US where it is off by 0.1% over three months. Over 12 months US M2 is up at just a pace of 1.4% compared to 7.9% in the EMU. Real money growth in the UK is quite steady. In Japan real money growth is slow but is being held fairly steady.

The memo item on the right of the table shows how relentless the rise has been in the price of crude oil in these various periods. Central banks have done a really impressive job in running policy amid this ongoing energy shock as well and a new shock stemming from food prices.

Judging by interest rate policy, monetary policy in the US is loose. But judging from the growth in real balances, US monetary policy is tighter than in UK, EMU or Japan over three months and tied with Japan for stringency over the past year.

Look at Global and Euro Liquidity Trends
Saar-all Euro Measures (EA13): Money & Credit G-10 Major Markets: Money Memo
  €-Supply M2 Credit:Resid Loans $US M2 ££UK M4 ¥¥Jpn M2+Cds OIL:WTI
3-MO 9.8% 10.8% 10.3% 6.7% 12.6% 2.9% 41.6%
6-MO 11.4% 13.1% 10.7% 6.4% 11.6% 2.2% 58.2%
12-MO 11.3% 12.9% 11.0% 5.8% 12.5% 2.1% 69.6%
2Yr 6.7% 12.2% 10.8% 5.5% 12.8% 1.5% 19.1%
3Yr 15.0% 17.9% 16.4% 8.0% 19.4% 2.4% 40.9%
Real Balances: deflated by Own CPI. Oil deflated by US CPI
3-MO 5.1% 6.0% 5.6% -0.1% 9.7% 0.8% 32.6%
6-MO 7.1% 8.7% 6.4% 1.6% 8.5% 0.8% 51.1%
12-MO 7.9% 9.5% 7.6% 1.4% 10.1% 1.3% 62.4%
2Yr 7.6% 9.4% 8.1% 2.2% 10.1% 1.1% 15.4%
3Yr 7.1% 8.9% 8.0% 1.7% 10.0% 1.4% 21.5%
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