Eurozone Business Lending Drops to 22 Billion Euros in July

Bank lending to eurozone businesses fell to 22 billion euros in July, continuing a downward trend from 34 billion euros in May and 27 billion euros in June. The European Central Bank attributed this decline to rising borrowing costs after it raised the key interest rate to 2.25% in June. This monetary tightening was designed to combat inflation fueled by energy price spikes resulting from the U.S.-Iran war.

The most significant contraction occurred in long-term loans with maturities exceeding five years, which plummeted from 21 billion euros in June to 9 billion euros in July. In contrast, lending to households remained stable at 17 billion euros. The sharp drop in business credit indicates a weakening of investment and overall economic activity within the region.

Investors now expect the central bank to further increase the key interest rate to 2.5% during its scheduled meeting on September 10.