Monthly Monetary Report

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

Summary

• In August, there was significant growth in monetary aggregates in broader pesos, as a result of the significant increase in term placements, in a context of improvements in expectations, facilitated by the actions of the Central Bank. For its part, the M2 monetary aggregate responded to its seasonal pattern and registered a monthly decrease of 0.5%, with a lower share of the working capital compared to the previous month, in which the payment of Christmas bonuses had taken full effect. Thus, M2 reached $175,070 million in August, with which its growth compared to the same month of the previous year stood at 11.2%.

• Time deposits showed significant growth, increasing 4.6% in the month, with increases in both the public and private sectors. Private sector placements grew 3.6%, showing increases in both the retail segment (placements of up to $1 million) and in the wholesale segment.

• Continuing its monetary policy strategy, and in view of the better performance of the local money market, on 08/10/09 the Central Bank ordered a new reduction of 0.5 p.p. in interest rates for pass operations. Thus, the interest rates on passive passes were set at 9.5% and 10%, for 1 and 7 days, respectively, while the interest rates on 1-day and 7-day active passes were set at 11.5% and 12%, respectively. Market interest rates converged to the new rate corridor established by the BCRA.

• Bank reserves in pesos (cash in banks plus the balances of the current accounts of financial institutions in the BCRA) represented 15.7% of deposits in pesos in August, which resulted in a surplus of 0.3 p.p. above the minimum cash requirement, somewhat lower than in other periods, denoting better liquidity management in a context of less uncertainty. Adding the net pass position with the BCRA, the liquidity in pesos of the entities was 20.6% in August (similar to that of the previous month). Meanwhile, incorporating the holdings of LEBAC and NOBAC, the ample liquidity ratio amounted to 34.7% of deposits in pesos (0.3 p.p. higher than in July).

• Loans in pesos to the private sector showed an increase in their monthly average of 0.3% ($380 million) in August, registering a year-on-year expansion of 9%. The monthly growth was mainly explained by financing for consumption. After four months of declines, mortgage loans (net of the falls recorded by portfolio securitizations) advanced 0.2% ($40 million).

• The BCRA continued to work to deepen regulations aimed at encouraging credit to the private sector. In this regard, it approved a series of measures aimed at making different requirements for access to credit more flexible, which seek to simplify the information required both for the submission of credit applications by economic agents and that necessary for the evaluation of the risk profile of applicants and the subsequent origination of loans by financial institutions. In addition, in conjunction with the Electronic Open Market (MAE), it adopted measures aimed at boosting the interest rate futures market. The BCRA enabled a mechanism to participate in the OCT-MAE rate futures market, facilitating credit between counterparties through the so-called “Giro Function”, which allows operations to be carried out whose “peaks” (purchase and sale offers) had identical terms but could not be arranged due to lack of credit to operate between the parties.