Monthly Monetary Report

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

Summary

Given the context of a new path of inflation targeting and a projection of a more moderate annual increase in regulated prices than in previous years, the BCRA considered that the contractionary bias of monetary policy was at a high level and decreased its monetary policy rate – the center of the 7-day pass corridor – on two occasions during January. by a total of 150 basis points (bps), bringing it to 27.25%.

Interest rates in the interfinancial lending markets moved within the BCRA’s pass corridor, reducing after changes in the monetary policy rate. Passive interest rates interrupted the upward trajectory they had shown until the end of last year and, in particular, those paid by the largest deposits, began to show declines. The interest rate charged on discounted documents followed a similar evolution to the passive ones, while those applied to longer-term financing maintained the upward trend they had been showing.

As of January 11, the BCRA incorporated a new instrument to manage money market liquidity: liquidity bills (LELIQ). LELIQs are bills with a 7-day term, which can be traded on the secondary market. The BCRA’s counterparties in this market can only be financial institutions for their own portfolio. In the course of January, they gained participation as a destination of surplus bank liquidity and at the end of January the outstanding balance of LELIQ reached VN $69,259 million.

Considering balances in real and seasonally adjusted terms, private M3 increased 1.2% in January, while private M2 remained stable compared to December. Thus, for the third consecutive month, time deposits in pesos were the component that contributed the most to the increase in private M3. Within time deposits, the evolution of those of more than $1 million stood out; in part, encouraged by the growth of those made by financial service providers.

Private sector lending continued its upward trend in real and seasonally adjusted terms. Total loans, pesos and foreign currency, exhibited a monthly increase of 3%, while loans in local currency grew 1.5%. In the last 12 months, total credit accumulated a growth of 26.6% in real terms.

In the peso segment, mortgage loans continued to be the fastest growing, reaching a seasonally adjusted average monthly increase of 7.4% in real terms in the last 3 months. In nominal terms, mortgage loans presented a monthly increase of 9.9% ($12,150 million), accumulating a growth of 118.2% in the last 12 months. It should be noted that UVA financing continued to increase its share of total loans to individuals, covering 93% of the amount granted in the last month. Since this instrument was launched, $65,800 million of mortgages have been granted in UVA.

In a period in which loan growth is seasonally low, the increase in deposits in pesos far exceeded that of loans to the private sector and financial institutions increased their liquid assets. Bank liquidity in local currency (measured as the sum of cash in banks, the current account of entities in the Central Bank, net passes with such entity and the holding of LEBAC and LELIQ, as a percentage of deposits in pesos) showed an increase from 1.6 p.p. to 41.3% of deposits. Growth was concentrated in the BCRA’s new instrument, the LELIQ, which in the month represented 1.9% of deposits in pesos.