Monthly Monetary Report

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

• In April, inflation data for March were published. The general level of INDEC’s GBA CPI increased 2.4% compared to February, while its core component grew 1.8% in the month. In turn, unlike what was observed in February, in March the inflation indices of other jurisdictions reflected increases higher than those of the GBA CPI. On the other hand, the high-frequency indicators followed by the Central Bank indicated that in April inflation would have remained above what was expected by the monetary authority.

• In this scenario, on April 11 the BCRA decided to tighten its stance, increasing its monetary policy rate by 150 basis points (bps), the center of the 7-day pass corridor, to 26.25%. The 7-day transfer corridor went to 25.5%-27%.

• The BCRA also continued to absorb liquidity through open market operations. In April, LEBAC was placed in the secondary market for VN $102.4 billion, overcompensating for the partial renewal of maturities in the primary market and the fall in the balance of passive passes with this entity. During the month, interest rates rose 80 bps in the secondary segment of LEBAC, accumulating an increase of approximately 250 bps in the last two months.

• The increase in the balance of LEBAC was distributed among holders of the non-financial private sector and financial institutions. The higher holdings of these securities by the non-financial sector had as a counterpart a nominal stability of the monetary aggregates of the private sector and a fall in their levels when considering the balances in real and seasonally adjusted terms. Among the components of private M3, the fall in real terms was driven by time deposits.

• On the other hand, the net purchases of LEBAC by financial institutions came from the reduction of their balances in passes and the bank liquidity indicator in local currency (current account at the BCRA, cash, LEBAC balance and passes at the BCRA, in terms of deposits) stabilized after several months of increase.

• Following the tightening of monetary policy, interest rates on shorter-term operations were raised. Those of the interfinancial loan markets rose to the new floor of the pass corridor while, between the passive and active rates, the BADLAR of private banks grew 1.1 p.p. between the end of March and April, and that charged for the discount of documents by the group of private entities increased 1.3 p.p. in the same period.

• Loans to the private sector increased both in nominal terms and when considering their real and seasonally adjusted balances. When observing the behavior of the different lines of financing in pesos, the one that presents the most drastic change in terms of its real growth is that of mortgage loans. In the course of 2017, mortgage loans in pesos managed to break a downward trend that they had maintained during previous years uninterruptedly. Mortgage loans denominated in UVA have favoured the greater dynamism of the line. In the last month, more than $1,200 million were granted, concentrating just over half of the mortgage loans granted to families. Thus, since the launch of this instrument, and until April, approximately $5,800 million were disbursed.