Monthly Monetary Report

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

1. Synthesis

• In July, the total means of payment (M2) show a marked seasonal behavior, which is associated with the payment of the complementary half annual salary and winter vacations. Thus, M2 registered a monthly increase of 4.5%, reaching an average balance of $296,350 million. On the other hand, private sector means of payment (private M2) showed a growth of 6.1%, with increases in working capital held by the public and in savings bank placements partially offset by a fall in current accounts.

• As has been observed in recent months, the creation of money during the month of July was led by secondary expansion, that is, the granting of loans in pesos. Other factors that contributed to explain the monthly increase in monetary aggregates were public sector operations and the Central Bank’s net purchases of foreign currency in the market.

• Private sector fixed-term deposits showed a growth of 0.8%, driven by the increase in placements in the segment of less than $1 million. Although the monthly increase in private sector time deposits appears moderate, it is similar to that observed in 2006 and 2007 and allowed the first 7 months of 2011 to accumulate a higher average monthly growth than in previous years. In fact, between January and July 2011, private sector term loans increased at a rate of 2.4% per month, compared to an average monthly increase of around 1.5% in the same period of 2006, 2007 and 2010.

• Loans in pesos to the private sector grew 5.4% ($10,390 million) in July, registering the largest monthly increase since the end of the 2001-2002 crisis and reaching a year-on-year expansion rate of 47.1%. Commercial lines were the ones that contributed the most to this increase, accounting for more than half of it, so they continue to show a growth rate above that of lines intended to finance household consumption. In July, the average balance of loans to the private sector, in pesos and in foreign currency, represented 12.9% of GDP, 1.3 p.p. more than last December.

• In July, the sixth tender for funds from the Bicentennial Productive Financing Program (PFPB) was held. On this occasion, $292 million were awarded, bringing the total allocated since the beginning of the PFPB to $1,829 million, of which $722 million were disbursed until the end of July.

• Interest rates on LEBAC and NOBAC placements remained relatively stable, while interest rates on pass operations remained unchanged. Both the stock of these securities and that of the passive passes for the Central Bank showed a fall in a context of lower purchases of foreign currency by this Institution.

• Passive interest rates registered some increases in July. In particular, the BADLAR rate of private banks showed a monthly increase of 0.4 p.p. and stood at 11.6%, while, in the retail tranche (placements of up to $100 thousand), the interest rate for deposits up to 35 days averaged 9.6%, just 0.1 p.p. more than that observed the previous month. On the other hand, lending rates showed limited variations. The average monthly interest rate on current account advances was around 18.6%, increasing 0.2 p.p. compared to June, while the average monthly interest rate on signature-only documents stood at 15.4%, 0.4 p.p. higher than that evidenced in the previous month.