Monthly Monetary Report

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

Summary

• Total means of payments (M2) grew 6.6% in January, driven by the behavior of demand deposits in the public sector and, to a lesser extent, by the increase in private M2. Both total M2 and private M2 registered a decrease in their year-on-year growth rate, of 0.5 p.p. and 1.2 p.p., respectively.

• Fixed-term deposits in pesos in the private sector had a notable performance in January, reaching a monthly growth of 6.6% ($7,100 million), an all-time record for the month. Both placements of more than $1 million and those made for lower amounts contributed to this increase. Thus, in January, private sector term loans reached a year-on-year expansion rate of 35.9%, around 10 percentage points (p.p.) above the growth of transactional deposits.

• Financial institutions used the increase in deposits in pesos to grant loans to the private sector and to increase their liquid assets. The growth of loans in pesos to the private sector continued to be one of the main factors in the expansion of monetary aggregates in pesos. In January, loans in pesos to the private sector increased 2% and reached a year-on-year variation of 47.7%. The monthly increase was distributed among all lines of financing, although those aimed at consumption stood out.

• The liquidity ratio in pesos (calculated as the sum of cash in entities, current accounts of entities at the Central Bank, net passes with the Central Bank and holdings of LEBACs and NOBACs, in terms of deposits) increased 1.8 p.p. compared to the previous month and reached 36.7%.

• In line with the increase in liquidity levels of financial institutions, the main short-term interest rates continued to fall in January. Among the passive rates, the largest drop was recorded in the wholesale tranche, where the average of the BADLAR of private banks decreased 2.7 p.p., standing at 16.1%. In turn, the average interest rate for deposits of 30 to 35 days and up to $100 thousand, from private banks, stood at 13.5%, after decreasing 0.6 p.p. in the month.

• Short-term lending rates behaved similarly. The average monthly rate applied by private entities to current account advances for more than $10 million and up to 7 days of term, stood at 18.7%, decreasing by more than 4 p.p. in the month. On the other hand, the one applied by the same group of entities to documents discounted to companies up to 90 days registered a monthly drop of 2.7 p.p., averaging 23% in January.

• Interbank market interest rates also continued to decline. In both the unsecured market (call) and the guaranteed market (REPO round), the average interest rates of operations at 1 business day stood at 9.4%, 0.3 p.p. below the level recorded the previous month.

• International reserves continued to rise and on the last day of January reached US$46,594 million. The rise was mainly driven by the purchases of foreign currency by the Central Bank in the Single and Free Exchange Market (MULC), which totaled US$1.071 billion in the month.