The continued slowdown in euro zone M3 money supply growth in August has eased the way for a possible European Central Bank (ECB) rate cut.
The ECB said today annual M3 growth edged down to 7 per cent in August from 7.1 per cent in July. The reading was above the consensus forecast of 6.8 per cent and remained well above the bank's 4.5 per cent yardstick.
The less-volatile M3 three-month moving average inched down to 7.1 per cent from 7.3 per cent in July.
Financial markets showed no reaction to the data, with bonds moving lower on a rare share market rally, and economists said nothing changed in their view that money supply now played a secondary role for the ECB's interest rate outlook.
The ECB closely follows monetary aggregates as it feels that under normal circumstances fast-expanding money stock can spell inflation trouble ahead.
But the bank has made clear that anaemic recovery made it unlikely that strong M3 growth, inflated by investor flight from tumbling stocks into assets captured by the M3 aggregate, would translate into a surge in consumer prices.