ECB won’t accept fast credit growth
Hawkish risk: ECB won’t accept fast credit growth as price worth
paying
A return to the pre-crisis pattern of debt-fuelled domestic demand, current
account deficits and imported inflation is one route to inflation normalization.
Fixing the credit channel to ensure the creditworthy regain access to finance
was part of the post-crisis policy fix.
Credit supply is no longer a constraint. The
cash position of the corporate sector means corporate credit need not
accelerate much, at least in H1-18. If credit demand starts to come through
strongly, we believe the ECB hawks would grow more uncomfortable. The faster
the credit growth, the lower the inflation hurdle to tighter monetary policy.
EU Forecast
euf:ba18h:143/nws-01