Monthly Monetary Report

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

Summary

• In July, the means of payment (M2) stood at $161,220 million, implying a year-on-year variation of 15%, with increases in both demand and current deposits held by the public. For its part, private M2 stood at $139,300 million with a year-on-year variation that also reached 15%. Total deposits in pesos accumulated a monthly increase of $4,570 million, driving a growth of M3 in pesos of $6,270 million.

• An important part of the increase in M3 was driven by the good performance of fixed-term deposits from the private sector, which totaled a rise of $2,000 million in July. In particular, deposits of less than $1 million, which had been the most affected between late April and mid-June, were the ones that explained the subsequent change in trend. In the month there was a growth in both wholesale deposits (more than $1 million) and retail deposits.

• In a month with positive seasonality of the demand for money and within the framework of the normalization of the financial markets, the Central Bank increased the availability of monetary resources with the regulatory instruments it had been using (repurchase of own and Treasury government securities), together with a net purchase of foreign currency. Thus, international reserves ended the month at US$47,545 million, a level somewhat higher than the one recorded at the end of June.

• Once compliance with the reserve requirements was assured, mainly in the second half of July, the entities accumulated their surplus resources in passive passes for the Central Bank. In July, the balance of these operations reached an all-time high. The liquidity ratio – defined as the
balance in current accounts at the Central Bank, cash in banks and passive passes, as a proportion of deposits in pesos – stood at 20.5%, 1.5 p.p. above the value corresponding to the previous month. In this context, banks completed the bimonthly position – which covered June and July –
of minimum cash with a surplus of 0.3% of total deposits.

• The growth in deposits and bank liquidity was reflected in short-term interest rates. The BADLAR interest rate of private banks (deposits of more than $1 million, from 30 to 35 days) ended the month at 12.7%, with a decrease of 3.6 p.p. compared to the level it presented at the end of June.
Likewise, the average interest rates paid on retail deposits (up to $100,000) decreased, standing at 11.4% at the end of July. When analyzing the daily evolution of shorter-term lending rates, a downward trend was also observed, particularly from the
last days of July. Meanwhile, in the interbank loan market, there was an average monthly decrease of 1 p.p. in interest rates.

• Loans to the private sector increased 1.2% in the month, with a year-on-year expansion rate of 35%. Financing granted in pesos increased 1.1% ($1,150 million) in July, with an increase of $470 million in loans granted with real guarantee, followed by financing for consumption, which totaled a monthly increase of $400 million and loans linked to commercial activity, which grew by $290 million.