With regard to financial conditions, members broadly shared the views of Ms. Schnabel and Mr. Lane in their introductions. Financial markets in the euro area were found to be relatively calm, with financial conditions – including exchange rate developments – generally stable and financing conditions for banks, households and businesses remaining very favourable. The relatively moderate market response to the second wave of the pandemic was seen as evidence of the effectiveness of the ECB`s monetary policy in reducing tail risks, including the risk of market fragmentation. At the same time, markets have remained fragile and could face a correction in pricing, for example in the event of a no-deal Brexit, a further reduction in the pandemic or a delay in an agreement on the disbursement of funds under the NGEU plan. Oil prices had edged up 1.8% since the Governing Council`s monetary policy meeting in September, reaching $39.8 a barrel on October 26, 2020, after being traded in a narrow range. The euro remained broadly stable against the US dollar (+0.4%), which continued to play a unique role in world trade, and in nominal terms (+0.2%) since the September session. With regard to monetary analysis, members broadly agreed with Mr. Lane`s view in his introduction that money supply (M3) growth continues to reflect domestic credit creation and ongoing purchases of securities by the Eurosystem. While monthly credit flows to non-financial corporations have eased in recent months due to a decrease in emergency liquidity needs and moderate investments, bank loans to the private sector have continued to benefit from public guarantees and monetary policy, in particular TLTRO III, which has allowed banks to significantly reduce their funding costs.
Bank borrowing rates remained close to historic lows. As regards financial conditions in the euro area, the EONIA maturity curve remained slightly inverted, but there was no firm expectation of an imminent interest rate cut. Despite upward movements in US interest rates, longer-term interest rates remained generally low. Government bond spreads had fallen further, reflecting expectations of additional monetary and fiscal support. Despite strong fluctuations over the period, risky investment markets remained broadly unchanged and, overall, financial conditions remained stable in the euro area. As for the external environment, the global economy had recovered rapidly at the beginning of the third quarter following the end of the lockdowns. The evolution of the global purchasing managers` index (PMI) outside the euro zone showed that the recovery in activity was quite strong until July, but that it had been relaxed in September. Retail sales had recovered strongly worldwide, while global consumer confidence had fallen from its lowest level, but still remained very weak. . . .