Monthly Monetary Report

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

1. Synthesis

• In August, total means of payment (M2) experienced a monthly growth of 1.3%, led by the behavior of demand deposits in the public sector and working capital held by the public; while private sector demand deposits remained at levels similar to those of the previous month. As a result, private means of payment (private M2) increased by only 0.8%. Meanwhile, the broader monetary aggregate in local currency (M3) presented a monthly increase of 1.9%.

• Loans in pesos to the private sector continued to be the main driver of growth in monetary aggregates. In fact, these financings maintained a high and sustained rate of expansion, accounting for more than 50% of M3’s growth so far this year. In August, they grew 3.2% ($6,530 million), the largest increase in recent years for the month, highlighting since the last quarter of 2010 the performance of loans associated with commercial activity, which have grown above the lines destined to finance household consumption. In particular, in the month under analysis, commercial loans reached a year-on-year growth rate of 54.8%, which exceeded the rate of change of consumer financing by 8.3 p.p.

• In August, a new tender for funds from the Bicentennial Productive Financing Program (PFPB) was held, which aims to improve the supply of credit for investment and productive activity, with a total fixed financial cost in pesos. On this occasion, $835 million were awarded, bringing the total awarded since the beginning of the PFPB to $2,664 million.

• Fixed-term placements in pesos by the private sector accelerated their monthly expansion rate to 3% ($2,850 million), the highest rate in the last 4 months. In August, increases were observed in both the wholesale bracket (of $1 million and more) and in that of less than $1 million. Thus, fixed-term deposits accumulated during the first eight months of 2011 the largest percentage increase for the same period in recent years.

• In August, financial institutions allocated the increase in deposits in pesos to the granting of loans in pesos to the private sector, while the level of their liquid assets remained stable compared to the previous month, with a replacement of LEBAC and NOBAC by passes in the Central Bank. As a result, the broad liquidity ratio (defined as the sum of cash in banks, the current account of entities in the Central Bank, net passes with the Central Bank and the holdings of LEBAC and NOBAC by entities, in terms of total deposits in pesos) remains at high levels. standing at 38.4%.

• Interest rates on LEBAC and NOBAC placements remained relatively stable during the first auctions in August, while towards the end of the month those corresponding to shorter-term LEBACs increased. On the other hand, the interest rates on pass operations were not modified.

• Passive interest rates and most of the active interest rates registered slight increases in August. In particular, the BADLAR rate of private banks increased 0.7 p.p. and stood at 12.35%, while, in the retail tranche (placements of up to $100 thousand), the interest rate for deposits up to 35 days averaged 9.9%, 0.3 p.p. more than that observed the previous month. Among the interest rates applied to loans, the largest increase (0.7 p.p.) was observed in the rate corresponding to discounted documents, which registered a monthly average of 14.6%. Meanwhile, financing through signature documents averaged August at 15.6% (0.2 p.p. more than in July) and the interest rate on total current account advances stood at 19%, after increasing 0.4 p.p.. For its part, the interest rate on title loans registered a monthly increase of around 0.8 p.p., standing at an average level of 18.9%. On the other hand, the interest rate applied to personal loans decreased 0.4 p.p., to 29.9%.