By David Barwick – FRANKFURT (Econostream) – Eurozone companies reported tighter bank lending conditions and a marked rise in short-term inflation expectations in the first quarter of 2026, the European Central Bank said Monday.

The ECB’s latest Survey on the Access to Finance of Enterprises, or SAFE, showed a net 26% of firms reporting higher interest rates on bank loans, up from 12% in the previous quarter.

Other financing costs, including charges, fees and commissions, also rose further, with a net 37% of firms reporting increases, compared with 28% in the fourth quarter of 2025. Collateral requirements increased for a net 14% of firms, unchanged from the previous quarter.

Financing needs for bank loans were stable, with a net 0% of firms reporting higher needs, down from 3% previously. Bank loan availability deteriorated slightly, with a net -3% of firms reporting an improvement, compared with -2% in the prior round.

The bank loan financing gap, which captures the difference between firms’ need for bank loans and their availability, remained positive but edged down to 2% from 3%.

Firms expected external financing availability to decline marginally over the next three months. The general economic outlook remained the main factor weighing on external finance availability, cited by a net 26% of firms, up from 20%.

The survey also pointed to stronger price and cost expectations. Firms expected selling prices to rise 3.5% over the next 12 months, up from 2.9% in the previous survey round.

Expected non-labor input cost growth, including energy, rose to 5.8% from 3.6%, while wage expectations moderated to 2.8% from 3.1%.

The ECB said the war in the Middle East had significantly increased firms’ selling price and input cost expectations but had not affected wage expectations.

Daily responses collected before and after February 28 showed that firms questioned later in the fieldwork period reported higher cost and price expectations. Expectations for wage and employment growth remained broadly stable over the survey period.

Median one-year ahead inflation expectations rose to 3.0% from 2.6%, with wider dispersion in short-term views, mainly due to firms interviewed after the onset of the war.

Median inflation expectations at the three- and five-year horizons were unchanged at 3.0%, though the distribution of five-year expectations widened. The share of firms reporting upside risks to their five-year inflation expectations rose to 65% from 56%.

Firms reported broadly unchanged turnover in the previous three months, with a net 1% indicating an increase, down from 7% in the fourth quarter. For the next quarter, a net 29% expected turnover to rise, up from 18%.

Profitability continued to deteriorate, with a net 16% of firms reporting lower profits, compared with 10% in the previous quarter.

Investment increased for a net 3% of firms, down from 6% and below earlier expectations. Looking ahead, a net 13% expected investment to rise, up from 9%.

The 38th round of SAFE was conducted between February 19 and April 1 and covered 10,544 Eurozone firms, of which 9,750, or 92%, had fewer than 250 employees.