Firms see tighter lending, higher inflation expectations
Euro area firms reported a net tightening of bank loan conditions and a marginal decline in availability in Q1 2026. The ECB's SAFE survey also found short-term inflation expectations rose markedly, while wage expectations moderated.
Tightening credit, stable needs
Euro area firms faced a significant tightening of bank loan conditions in the first quarter of 2026, according to the ECB's latest Survey on the Access to Finance of Enterprises (SAFE).
A net 26 percent of firms reported higher interest rates on bank loans, a marked increase from 12 percent in the previous quarter.
Other financing costs, including charges and fees, also rose for a net 37 percent of firms, while collateral requirements remained stable at a net 14 percent.
Despite these tighter conditions, firms' financing needs for bank loans remained stable (net 0 percent).
However, the perceived availability of bank loans marginally deteriorated (net -3 percent).
This resulted in the bank loan financing gap, which measures the difference between need and availability, remaining positive at 2 percent, slightly down from 3 percent previously.
Firms continued to view the general economic outlook as the primary constraint on external financing, with a net 26 percent citing this factor.
Inflation outlook shifts
Euro area firms also adjusted their inflation and wage expectations.
They anticipated stronger increases in selling prices (3.5% vs 2.9% previously) and non-labour input costs (5.8% vs 3.6%) over the next 12 months.
Conversely, wage expectations moderated slightly, projected to increase by 2.8 percent, down from 3.1 percent.
The war in the Middle East significantly impacted firms' selling price and input cost expectations, but not wage expectations.
Short-term inflation expectations for the one-year horizon increased markedly to a median of 3.0 percent (up from 2.6%).
However, median three- and five-year ahead inflation expectations remained stable at 3.0 percent, though the distribution of longer-term expectations widened, with 65 percent of firms reporting upside risks.
Inflationary pressures persist
The SAFE survey reveals a challenging inflation landscape, with firms anticipating higher selling prices and input costs, even as wage expectations slightly moderate.
This suggests that underlying price pressures remain robust, complicating the disinflationary path for the euro area.
For the ECB, these findings reinforce a cautious stance, indicating that the conditions for significant monetary policy easing are not yet firmly established.