Euro area credit is tightening fast, and published central bank research suggests the squeeze is only beginning to bite.
The latest bank lending survey shows firm credit standards tightened a net 9% in Q3, with another 7% expected in Q4. Housing loan demand collapsed 27%, driven mainly by higher rates, and banks expect a further 36% drop next quarter. Consumer credit standards tightened 14%, and retail funding access deteriorated at the fastest pace since the series began in 2011. Research also attributes part of the squeeze to the shrinking ECB balance sheet, with the drag expected to grow.
On the policy side, Bank of Finland's Olli Rehn frames the September 25bp hike as vigilant but steady, arguing there's little evidence yet of second-round wage effects even with headline inflation at 3.8%. One camp of analysts expects headline to ease toward 2.1% by 2028. A more hawkish view, voiced at the Riksbank, warns energy prices could still seep into underlying inflation — a key split to watch into the next round of decisions.
By the numbers:
• Policy rates: Fed 3.75–4.00%, ECB 2.50%, BoE 3.75%, BoJ 1.25%.
• Next decisions: Fed 28 Oct 2026 (50 of 51 research houses expect a hold); ECB 29 Oct 2026 (34 of 34 research houses expect a hold); BoJ 30 Oct 2026 (27 of 27 research houses expect a hold); BoE 5 Nov 2026 (16 of 17 research houses expect a hike).
Charts: finchiefs.com/data/policy-rates