Money growth cools as euro area households and firms tap the brakes
Money growth slowed down in the euro area during December 2025, with households and businesses adding to their savings at a more modest pace during this time, according to a report from the European Central Bank (ECB).
The ECB said the broad money supply, known as M3, grew by 2.8 per cent in December, down from 3.0 per cent in November, meaning the amount of money circulating in the economy is expanding more slowly.
This matters for everyday readers because slower money growth often reflects weaker spending and borrowing, which can influence economic momentum, inflation and interest rate decisions.
On average, M3 growth stood at 2.9 per cent over the three months to December, indicating a gradual cooling rather than a sharp slowdown.
The ECB explained that cash and overnight deposits, which make up the narrow money measure known as M1 and include money people can use immediately, grew by 4.7 per cent in December, down from 5.0 per cent in November.
This suggests that households and businesses are still holding more readily available money, but are doing so less quickly than before.
Short-term deposits that are locked in for a period, such as time deposits, continued to shrink, with their annual growth rate at -0.4 per cent in December, compared with -0.8 per cent in November.
Market-based financial instruments such as short-term bonds and money market instruments fell more sharply, with annual growth dropping to -1.0 per cent from 1.5 per cent a month earlier.
Looking at what drove overall money growth, cash and overnight deposits remained the main support for M3, contributing 3.0 percentage points to annual growth, although this was less than in November.
Other short-term deposits had a slightly negative impact on money growth, while marketable instruments also reduced the overall figure.
Among savers, households increased their deposits by 3.0 per cent, slightly less than the 3.1 per cent recorded in November, pointing to stable but cautious saving behaviour.
Deposits placed by non-financial companies also eased, rising by 3.4 per cent in December compared with 3.5 per cent the month before.
By contrast, deposits held by investment funds surged, jumping to an annual growth rate of 4.3 per cent from just 0.4 per cent in November, showing a sharp shift in financial investment flows.
The ECB also broke down money growth by looking at what sits on bank balance sheets beyond deposits, known as the counterparts of M3.
Lending to households and businesses, referred to as claims on the private sector, remained the biggest driver of money growth but slowed, contributing 2.8 percentage points compared with 3.1 percentage points in November.
Assets held outside the euro area, known as net external assets, continued to support money growth by 1.7 percentage points, unchanged from the previous month.
Lending to governments made a small positive contribution, adding 0.3 percentage points, while longer-term bank funding reduced money growth by 1.1 percentage points.
Turning to lending, the ECB said total claims on euro area residents grew by 2.3 per cent, down from 2.6 per cent in November, confirming a general easing in credit expansion.
Loans to governments edged up slightly, growing by 0.8 per cent, while lending to the private sector slowed to 3.0 per cent from 3.3 per cent.
After adjusting for technical factors, loans to households grew by 3.0 per cent, up from 2.9 per cent, indicating continued demand for mortgages and consumer credit.
At the same time, loans to non-financial companies cooled, rising by 3.0 per cent compared with 3.1 per cent in November, suggesting firms are becoming more cautious about borrowing.
Overall, the ECB data paint a picture of steady but softening financial activity, with households still saving and borrowing, businesses slightly pulling back, and money growth easing as the euro area economy moves into the end of 2025.