06:13 AM EST, 01/28/2025 (MT Newswires) -- The European Central Bank's bank lending survey released on Tuesday showed promising signs of investment growth in the fourth quarter, with credit standards remaining stable after a prolonged period of tightening, said ING.

The small improvements in loan demand, reported two days before the ECB is slated to release its policy statement on Thursday, won't yet translate into much stronger investment growth, pointed out the bank. Movements are too small for that, and current investment conditions aren't "too attractive." Low capacity utilization rates in manufacturing and economic uncertainty as such continue to weigh on the short-term investment potential in the eurozone.

Loan demand also improved somewhat for the first time since the third quarter of 2022, wrote the bank in a note. This quarter, the ECB reports that concerns about risks in the global economy have increased among banks, which results in credit standards for businesses being tightened again.

Banks did see continued cautious increases in loan demand from businesses according to the survey.

For mortgages, credit standards remained unchanged but demand continued to improve strongly. This means that the housing market, which had already shown signs of quick recovery, is expected to recover further even though longer-term yields have increased since November, stated ING.

For the ECB, it must be "frustrating" that recent cuts aren't yet resulting in meaningful monetary easing through the lending channel, according to the bank. At the same time, current levels of interest rates are widely considered to be still restrictive and the ECB wants to move to neutral relatively quickly.

With more easing to come, the ECB will expect further improvements in the lending channel to come through, added ING.