Monthly Monetary Report

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

Summary

In February, the Consumer Price Index (CPI) of the INDEC for January was released, which showed a monthly increase in the general price level of 1.8%, and 1.5% for the core component. In this context, considering that high-frequency indicators suggest that inflation in February was higher than in January, the BCRA decided to maintain its monetary policy rate, the center of the 7-day pass corridor, at 27.25%.

Interest rates in the interfinancial lending markets moved within the BCRA’s pass corridor, with average monthly values lower than those of January, reflecting changes in the monetary policy rate last month. Passive interest rates fell compared to January, highlighting the fall in the TM20 of private banks, whose average monthly level decreased by 0.3 p.p. For their part, lending rates interrupted the upward trend they had been showing until January.

The BCRA continued to manage the liquidity conditions of the money market by selling LEBAC in the secondary market and also LELIQ. The latter were introduced in January and have gradually gained a share among the liquid assets of financial institutions: at the end of February, LELIQ’s outstanding balance reached VN $154,565 million. In February, the monetary contraction generated by the sales of LEBAC and LELIQ more than offset the expansion associated with the partial renewal of the monthly maturity of LEBAC.

Considering balances in real and seasonally adjusted terms, private M3 increased 0.3% in February, slowing down compared to previous months, after a moderation in the growth of private sector time deposits in pesos. At least part of the slowdown in these placements was associated with the placement of debt in pesos by the National Government, which attracted funds from investors who had been allocating a significant part of their portfolio to time deposits; in particular, insurance companies.

In real and seasonally adjusted terms, total loans, in pesos and foreign currency, increased 2.9% in February and accumulated an increase of 23.8% in the last 12 months. Meanwhile, loans in local currency grew 2.5%. The most dynamic lines were those of mortgage loans, credit card financing and personal loans.

In the peso segment, mortgage loans continued to be the fastest growing, reaching a seasonally adjusted average monthly increase of 7.2% in real terms in the last 7 months. In nominal terms, mortgage loans exhibited an increase of 7.6% ($10,200 million), accumulating a growth of 128.6% in the last 12 months. Month after month, UVA financing continues to gain share of total loans to individuals, totaling 94% of the total in the last month. Since the launch of this instrument, approximately $75,000 million of mortgage loans have been granted in UVA.

The sale of dollars by the National Government provided deposits to public banks, far outpacing the growth of loans to the private sector, which resulted in an increase in bank liquidity in local currency (measured as the sum of cash in banks, the current account of the entities in the Central Bank, net passes with such entity and the holding of LEBAC and LELIQ, as a percentage of deposits in pesos), which went to 42.6%, 1.4 p.p. above January. The growth was compounded by higher holdings of LELIQ.