Monthly Monetary Report

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

Summary

• During July, the broadest aggregate in pesos (M3) showed a monthly growth of 4.4%, accumulating an increase of 30.3% in the last year, 0.8 p.p. above that observed in the previous month. Among its components, the growth of working capital held by the public and demand deposits stands out, driven in part by seasonal factors, linked to the payment of the half complementary annual salary and the greater demand for liquidity as a result of the winter holidays.

• On the other hand, fixed-term deposits in pesos in the private sector presented a growth of 2.7%, one of the highest in recent years for the month, with increases in both the retail and operations segments of more than $1 million.

• Loans in pesos to the private sector once again registered a strong increase compared to the levels of expansion exhibited in the first part of the year. The growth for the month was 4.2% ($11,540 million), which is equivalent to a year-on-year variation of 41.2%. Breaking down the month’s increase into the percentage points explained by each of the major lines, it is verified that the commercial lines made the main contribution (3.6 p.p.), explaining around 85% of the increase in July.

• The level of liquidity in pesos of the entities (including holdings of LEBAC and NOBAC, net passes held at the Central Bank, current accounts at the Central Bank and cash) increased slightly in absolute terms, although in terms of deposits it decreased by 0.8 p.p. and was equivalent to 36.4% of total deposits in pesos.

• An increase in the interest rates paid by financial institutions to the private sector was observed. This increase was led by interest rates in the operations segment of more than $1 million, while in the retail segment – which is characterized by being more stable – the rise was more limited. In fact, the BADLAR rate of private banks averaged 13.2%, accumulating a monthly increase of 1 p.p.. Meanwhile, the interest rate paid by private banks for their fixed-term deposits of up to $100,000 (up to 35 days) averaged 11.6% in July, registering a monthly increase of 0.4 p.p..

• Interest rates applied to loans to the private sector showed a heterogeneous behavior in July. While interest rates on lines intended to finance commercial activities showed monthly increases, those applied to loans with real collateral continued the downward trend observed in recent months. The monthly average of the interest rate on current account advances for more than $10 million and up to 7 days of term showed an increase of 0.7 p.p., standing at 13.1%. On the other hand, among loans with real collateral, the interest rate applied to mortgages for families remained at 15.2%, while that corresponding to those with collateral stood at 22%, registering a decrease of 0.4 p.p. in the month. In the case of lines intended to finance consumption, the interest rate applied to personal loans averaged 33.8% in June, increasing 0.2 p.p. in the month.

• In the foreign currency segment, deposits decreased by 8.2% in the month. This drop was essentially explained by private sector placements, given that those belonging to the public sector grew slightly. It is worth mentioning that although private sector placements continued to show declines throughout July, the daily decrease was reduced. At the same time, it is important to remember that, as a result of the prudential policies implemented in recent years, the Argentine financial system has a low degree of dollarization and a very low level of currency mismatch, which allowed it to face the return of deposits in foreign currency without inconveniences.