Euro zone M3 money supply growth accelerated in April, ECB data released today said, confounding market expectations for a cooling in monetary expansion.
The ECB said M3 growth, the European Central Bank's key policy guide, picked up to 4.7 per cent in April from 4.6 per cent in March, when adjusted for foreign money market fund holdings.
ECB President Mr Wim Duisenberg said earlier this week the total distortion from foreign holdings of M3 components totalled around one percentage point.
The ECB cited the distortions of M3 data as one of the reasons for its surprise May 10th quarter-point interest rate cut, arguing the figures exaggerated inflation pressures.
But it has also warned that further revisions to M3 data should not be seen as an automatic trigger for more rate cuts.
The ECB has said that foreign holdings of euro area liquid assets that make up the M3 aggregate should be excluded from the data as they did not contribute to inflation pressure.
The broad M3 measure consists of cash in circulation, overnight and short-term deposits and those redeemable at a notice of up to three months, and a range of money market instruments and short-term debt securities.
Economists had predicted the headline-unadjusted M3 growth to slow to 4.8 per cent year-on-year but argued the data were hard to interpret.