Monthly Monetary Report

Monthly report on the evolution of the monetary base, international reserves and foreign exchange market.

Summary

• In the month, monetary aggregates continued to show a prudent behavior, in line with the Monetary Program. Total means of payment (M2) registered an average balance of $152,500 million in April, which implies a year-on-year growth of 18%, similar to the year-on-year variation they had exhibited the previous month. On the other hand, in the first four months of the year, 73% of the variation in M3 was explained by the growth in term placements, which compares favorably with what happened in the first quarter of 2007, when only 56% of the growth in M3 was caused by the increase in fixed-term deposits.

• Time placements in pesos by the private sector grew by $600 million (1%) in April, accumulating an increase of $6.6 billion (12%) so far in 2008, a growth rate similar to that of the first quarter of 2007. However, this year the composition of the increase in the volume of term loans in the first four months was oriented towards longer maturities: deposits placed from 90 to 365 days accounted for 39% of the increase in 2008, compared to 20% last year; while those with a term of up to 89 days went from making up more than 70% of the total increase in 2007 to only 45% this year.

• Bank liquidity indicators reflected the continuity of high liquidity conditions in the local market. Thus, the direct bank liquidity ratio – defined as cash in banks, bank current accounts in the BCRA and passive passes for the BCRA, with respect to total deposits – continued to be at very high levels: 19.6% for all entities. That liquidity ratio for private banks reached around 21% in April, which implies the highest level in the last 3 years. In addition, banks completed the monthly minimum cash position in pesos with an over-compliance (over-integration) of 0.3% of total deposits, a proportion slightly higher than usual for the closing of the periods of measurement of reserve requirements.

• The broader liquidity indicator, which includes the portfolio of monetary regulation instruments (Lebac and Nobac), issued by the Central Bank, also showed a very high level (similar to the historically high average recorded during the last year). Such securities can be used by institutions to access short-term liquidity (through pass operations) or directly to long-term liquidity (since the Central Bank cancels them by renewing figures lower than the maturities or directly repurchasing them, when it considers that this is appropriate). In short, taking into account these monetary regulation instruments, the Financial System has the equivalent of 39% of total deposits as a liquidity reserve.

• Loans to the private sector continued to perform very well. In particular, financing in pesos increased 3.2% ($3,070 million) in April and accumulated a growth of 41% in the last 12 months. In the month, commercial loans had a prominent participation, which accounted for $1,350 million of the monthly increase and, especially, current account advances, which began to have greater demand towards the end of the month in the face of a new period of strong tax maturities. • In this context, average interest rates in April did not show significant variations with respect to those of March, although in the case of passive rates and those operated in the interbank loan market, a slight increase was observed in the last days of the month, which, in part, is associated with the greater demand for short-term financing from companies. The BADLAR of private banks stood at 8.7% (+0.2 p.p.) and the overnight interbank lending rate reached 7.9% (+0.1 p.p.). On the other hand, among the active interest rates, that of advances to companies for amounts over $1 million, also had a slight variation and stood at 14.4% (+0.3
p.p.).