Monthly Monetary Report

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

Summary

In January, measures continued to be implemented that increased the income of sectors that usually make more intensive use of the working capital, such as retirees and beneficiaries of social allowances. Thus, the working capital held by the public registered an average monthly increase of 5.1% in nominal and seasonally adjusted terms.

The Board of Directors of the BCRA ordered a gradual reduction in the interest rate of the Mutual Fund (FCI) passes in this institution in the course of January and the elimination of this type of operation as of February. In January, this measure resulted in a gradual transfer of funds from the BCRA to deposits in financial institutions, mainly on demand. Thus, the seasonally adjusted nominal growth of demand deposits in pesos of the private sector amounted to 8.2% and was mainly made up of deposits of $20 million or more.

A proportion of FCI passes also fueled the growth of time deposits in pesos, along with placements by families and companies. In the month, the average monthly balance of fixed-term deposits in pesos in the private sector rose 10.1% in nominal terms. The segment of placements adjustable by Purchasing Value Units (UVAs) grew at a much higher rate, but from a reduced level and accounted for 7% of the monthly increase.

From February, a new savings instrument is available: fixed terms adjustable by UVAs with the option of pre-cancellation from 30 days. This type of deposit offers a minimum interest rate of 1% nominal per annum + UVA. If the depositor decides to pre-cancel, they will receive a return similar to the traditional fixed-term rate, defined as 70% of the monetary policy rate.

In January, the average monthly balance of loans in pesos to the private sector registered a nominal seasonally adjusted increase of 0.9%, made up of the lines most associated with commercial activity and credit card financing.

To encourage financing for micro, small and medium-sized enterprises (MSMEs) with more favorable interest rates, on January 9 a new deduction was ordered on the requirement of Minimum Cash in pesos associated with loans that financial institutions grant to this type of companies with rates that do not exceed 40% nominal per annum. After the announcement of the measure, an increase in the participation of the promoted segment in the amounts operated of financing through document discounting began to be observed. From then on, the average interest rate at which smaller companies financed themselves fell faster than that of other companies. A similar pattern began to be observed in loans granted through single-signature documents starting in the last days of the month.

In order to gradually increase the term of its liabilities, as of January the BCRA began to tender LELIQ of longer duration. In the third week of the month, LELIQ of 7 and 14 days was tendered and the last week LELIQ of 14 and 21 days was awarded. The annual nominal rate (APR) of the 7-day LELIQ had ended 2019 at 55% and in the course of January decreases in the minimum level for LELIQ rates were ordered by a total of 5 p.p. The two LELIQs placed in the last week of January were awarded at the current minimum level, with annual nominal rates of 50%. As of the third week of January, the reduction of the 1-day passive pass rate of financial institutions was also ordered, which was defined as half of the monetary policy rate.

In line with the behavior of LELIQ rates, passive interest rates showed a decline throughout January. For example, the BADLAR of private banks ended the month at 34%, 5.4 p.p. below its level at the end of 2019. Among lending rates, those charged by the financing lines most associated with commercial loans followed a similar trend. The document discount rate averaged 44.9% in January, down 7 p.p. compared to December.