Lending to private sector slows

The annual growth rate of loans to the private sector in the Eurozone slowed in June, pointing to a soft patch in the economy and making it harder for the European Central Bank to argue for interest rate hikes. ECB figures released Wednesday showed loans to the private sector rose at an annual rate of 2.5 per cent, down from 2.7 per cent in May and weaker than analysts' expectations for 2.8 per cent growth. The figures showed loans to non-financial corporations increased by €20 billion (Dh106 billion) on the month, compared with €10 billion in May, leaving them 1.5 per cent stronger than the same time a year ago. "There is one positive story. Loan flows to non-financial corporations jumped ... Apart from that, the numbers are a bit disappointing," said Danske Bank economist Frank Oland Hansen. Article continues below Tough to justify "We still think that the ECB will try to use this window to get rates up to 2 per cent by early next year, but if everything is pointing towards the economy being in a slow patch, then it will be difficult to argue for a rate hike," he added. The ECB raised its key interest rate by a quarter of a percentage point to 1.5 per cent earlier this month. Euribor futures show markets are largely pricing out further ECB rate rises following the escalation of the Eurozone crisis, although the majority of economists still see at least one more increase this year.