Lending to euro zone businesses slowed in early weeks of Ukraine war

FRANKFURT (Reuters) - Bank lending to euro zone businesses slowed in March, reinforcing expectations that Russia's war in Ukraine would prompt both banks and corporations to tread cautiously, data from the European Central Bank showed on Friday.

With the war in Ukraine sapping confidence, policymakers are increasingly worried that banks will tighten access to credit, weighing on an economy that is already likely to stagnate, at best, during the first half of the year.

Growth in lending to businesses slowed to 4.2% in March from 4.5% a month earlier, a still healthy figure in line with pre-Covid trends.

Lending to households meanwhile accelerated to 4.5% from 4.4%, its highest rate since late 2008.

The M3 measure of money circulating in the euro zone grew by 6.3%, the slowest pace in two years - that is before the ECB boosted its bond purchases to respond to the coronavirus pandemic.

Banks in the ECB's quarterly lending survey already signalled their intention to curb access to credit in the second quarter, even as demand for fund was likely to rise.

Still, with inflation at a record high, the ECB is almost certain to cut stimulus further when it next meets on June 9, ending bond buys in July and signalling a rate rise in the third quarter.

(Reporting by Balazs Koranyi; Editing by Francesco Canepa)