Monthly Monetary Report

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

Summary

• The average balance of total means of payment (M2) reached $176,070 million in July, increasing 0.5% in the month and showing an increase of 9.2% in the last year. In a context of gradual recovery in the demand for money in the broad sense, this month saw an increase in the preference for time deposits. This confirms the bank’s commitment to the first pillar of monetary policy: ensuring convergence between the supply and demand of money.

• In this regard, during the month of July, particularly in the second half, there was greater dynamism in term placements, which, driven by both retail and wholesale placements, showed significant growth. In fact, between the last day of July and the last day of the previous month, $1,500 million were increased.

• The better performance of the local money market, driven by the prudential measures that the Central Bank has been adopting, allowed this Institution to continue with its countercyclical monetary policy. In particular, and to encourage a more efficient use of the liquid resources of financial institutions, at the beginning of July it reduced interest rates on 1-day and 7-day pass operations by 50 bps. It should be noted that in August, the BCRA reduced these interest rates by an additional 50 bps.

• Liquidity in pesos of financial institutions (cash in banks, current accounts in the BCRA and net passes with the BCRA) remained at high levels, resulting in 20.9% of total deposits in July. This level was 1.8 p.p. below that recorded in the previous month, in part, due to the dynamism that loans in pesos continued to show. Meanwhile, incorporating the holdings of LEBAC and NOBAC by the entities, the liquidity ratio amounted to 34.4% of deposits in pesos, 2 p.p. below the level recorded in June.

• In this context, short-term interest rates in the money market remained practically unchanged compared to June. In particular, the average monthly interest rate paid by private banks on retail time deposits, for amounts of less than $100,000, remained at 12%; while the monthly average of the interest rate paid by private banks in the wholesale tranche and for deposits of up to 35 days (BADLAR) stood at 13%. Meanwhile, in the interbank loan market, where the amounts traded remained at historically low levels, the monthly average of the interest rate for 1-business day operations stood at 10.2%, just 0.2 p.p. below the value recorded in June.

• Stability was also observed in the interest rates charged on loans granted to the private sector. Among the most relevant, in terms of the amounts operated, we can mention the interest rate charged for current account advances with agreement with companies, for up to 7 days of term for amounts greater than $10 million, which stood at 16.1%, accumulating a reduction of 7.2 p.p. in the last six months. Meanwhile, the average interest rate on discounted documents, the most operated line among the financing granted through documents, with 50% of the total operations, stood at 16.6%.

• Loan lines mainly for commercial purposes were the ones that drove the monthly increase experienced by loans in pesos to the private sector ($1,250 million). Financing instrumented with documents grew 2.8%