ECB's Q2 SAFE Survey Reveals Easing Inflation but Rising Borrowing Costs
Vexoda Newsroom
The ECB’s latest SAFE survey shows that euro area companies faced increased borrowing costs in the second quarter, while inflation expectations eased slightly. This article delves into the details and
In the second quarter of 2026, the European Central Bank's (ECB) Survey on the Access to Finance of Enterprises (SAFE) revealed a significant increase in borrowing costs for euro area businesses. A net 42% of firms reported higher interest rates on bank loans, up from 26% in the previous quarter.
This trend affected both small and medium-sized enterprises (SMEs) as well as large companies, with other financing costs also rising but at a slower pace than before. Despite these challenges, overall access to bank credit remained stable, though loan availability varied by company size: large firms reported improved access while SMEs faced slight difficulties.
The economic outlook continued to pose the main obstacle for external financing, yet banks' willingness to lend showed some improvement. Companies became more pessimistic about their own business prospects, particularly in terms of future sales and profits. Inflationary pressures also subsided; expected price increases fell slightly from 3.5% to 3.2%, while non-labour input costs slowed down to 5.2%.
Wage growth expectations moderated as well, dropping to 2.5% from 2.8%. However, inflationary risks remained, with median one-year and three-year expectations holding at 3.0%, and five-year expectations slightly rising to 3.1%. Many firms acknowledged the ongoing Middle East conflict's impact, diversifying suppliers and building inventories for supply chain resilience.
Artificial intelligence (AI) investments were expected to be primarily financed through internal funds; only a small portion would come from bank loans or other sources like grants and leasing. This suggests that companies are cautious about external financing options despite the growing importance of AI in business operations.
These findings have significant implications for traders, as they highlight potential shifts in corporate behavior towards cost management amid rising borrowing costs. The easing inflation could ease pressure on central banks to raise interest rates further but also signals broader economic challenges and uncertainties that may impact market sentiment.
Source: InvestingLive. Summarized and rewritten by the Vexoda Newsroom. This is market news, not financial advice.