Monthly Monetary Report

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

Summary

• In December, the collection of the complementary annual half salary, the end-of-year holidays and the beginning of the holidays generate a seasonal increase in the demand for money more associated with transactions. In this particular year, these factors were compounded by the effect of extraordinary payments to sectors that typically make more intensive use of working capital, such as retirees and beneficiaries of social allowances. Thus, the working capital held by the public registered an average monthly increase of 12.6% (7.0% in seasonally adjusted terms), while the average monthly balance of demand deposits in pesos in the private sector increased 14.4% compared to the previous month (6.5% when adjusted for seasonality).
• The average monthly growth of fixed-term deposits in pesos in the private sector was 3.5% and 5.1% in seasonally adjusted terms. During the first weeks of the month, the boost for these placements came from mutual funds, which captured liquid resources from companies before the payment of the complementary annual half salary. Once the payment was made, these funds and demand placements fed the term balances of individuals.
• Loans in pesos to the private sector moderated their growth rate, after 5 consecutive months of acceleration, registering an average monthly increase of 2.0%, considering nominal values and without seasonality. In real and seasonally adjusted terms, total loans in pesos to the private sector contracted by 2.1% in the month, completing the year with a real fall of 25.2%. In 2020, the BCRA will stimulate the supply of credit to the private sector, meeting the working capital needs derived from the state of emergency in which the country finds itself, and tending to the participation of long-term productive financing, particularly that intended for micro, small and medium-sized enterprises.
• In December, the Board of Directors of the BCRA decided to lower the lower limit of the LELIQ interest rate on two occasions, for a total of 8 p.p., bringing it to 55%. Passive interest rates fell between 4 p.p. and 5 p.p. in the month. In particular, the TM20 of private banks ended the year at 40.5% (TNA), 4.6 p.p. below the level it reached at the end of November.
• Among the interest rates charged on loans in pesos, the ones that fell the most were those applied to commercial loans, which are currently more concentrated in shorter-term operations than the rest of the lines. Thus, the document discount rate stood at 51.9%, decreasing on average 5.8 p.p. compared to November, while the rate applied to loans granted through single-signature documents averaged 57%, showing an average monthly drop of 5.3 p.p.
• In the foreign currency segment, as of mid-December, private sector deposits exhibited a reversal in the trend they had been showing, partly driven by the repatriation of funds from the tax benefits established within the framework of Law 27,541. This growth more than compensated for the fall observed in the first fortnight, causing the balance to expand 5.4% between the last day of November and December.
• The balance of international reserves ended December at US$44,781 million, which implied an increase of US$1,009 million compared to the end of the previous month. After the modifications in the conditions of access to the foreign exchange market established at the end of October, the BCRA was a net buyer of foreign currency and in December acquired US$1,121 million.