Monthly Monetary Report

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

1. Synthesis

• Total means of payment (M2) reached an average balance of $261,430 million in February, registering a fall of 3.1% compared to the average for January and a year-on-year growth of 28.6%. The monthly drop was associated with seasonal factors and specific public sector operations carried out mainly during January, which impacted the average level in February. On the other hand, private means of payment (private M2) remained relatively stable, presenting a monthly increase of 0.3% (35.5% y.o.y.). The year-on-year variation of private M2 includes a “base of comparison” effect, generated by the behavior of this aggregate in the first quarter of 2010. Both the variation of total M2 and that of private M2 are consistent with the annual target corresponding to the base scenario of the 2011 Monetary Program (27.9% for total M2 and 29.2% for Private M2).

• Continuing its managed floating policy, the Central Bank made purchases in the foreign exchange market for approximately US$900 million. 70% of the average monetary effect of these operations was sterilized through the instruments of monetary regulation available.

• Total private deposits increased by 1.9%, driven mainly by fixed-term deposits (3.4%) and, to a lesser extent, by demand loans (0.8%). Fixed-term deposits continued to register sustained growth, with an increase in both those belonging to the wholesale tranche (4.8%) and those corresponding to the retail stratum (2.4%).

• The broad liquidity ratio in pesos remained at high levels, standing at 40.5%. Financial institutions adjusted the composition of their liquidity at the end of the quarterly calculation of the Minimum Cash (MA) position, reducing both the assets eligible for integration and the net passes with the BCRA (0.3 p.p. in each case) and increasing the holdings of LEBACs and NOBACs (0.4 p.p.) in terms of total deposits in pesos.

• Loans in pesos to the private sector showed the highest monthly expansion rate in the last five years for the month of February, with a growth similar to that of 2006. In fact, they registered an increase of 1.9% ($3,140 million) in their average monthly balance, presenting a year-on-year variation of 40.3%, 2.4 p.p. above that observed the previous month. In particular, current account advances showed a growth of 6% ($1,300 million), the highest in the last nine months and exceeding that observed for the same month during the previous six years. Personal loans continued to show a good performance, growing at a similar rate to that of January (3.1%) and above the average for 2010. Also noteworthy were title loans, which reached record growth levels this month, registering a variation of 6% ($595 million).

• Interest rates paid by private financial institutions for deposits in pesos of up to 35 days remained stable, both in the wholesale and retail tranches. Thus, the BADLAR of private banks remained at around 11.1%, while that corresponding to fixed terms
up to $100 thousand stood at 9.2%.

• Most lending rates registered decreases in February. The average monthly interest rate on total current account advances decreased 0.3 p.p., standing at 18.5%. On the other hand, the interest rate corresponding to discounted documents stood at 13.4%, while that associated with single-signature documents stood at 15.3%, decreasing in both cases 0.1 p.p. compared to January. The interest rate on credit card financing stood at 31.2% in February after falling 1 p.p., while that on personal loans stood at 29.2% (0.1 p.p. below January).