Monthly Monetary Report

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

Summary

• The broader monetary aggregate in pesos (M3) registered a growth of 4.5% in July, with a year-on-year variation that stood at 34.9%. Although all its components showed an increase, the monthly increase was mainly explained by the working capital held by the public and deposits in private sector savings banks, which were driven by seasonal factors associated with the collection of the complementary half annual salary and winter vacations.

• Private sector time deposits continued to accelerate their year-on-year rate of expansion, reaching 42% in July. In the month, the performance of retail placements (of less than $1 million) continued to stand out, which presented a monthly increase of 5.1%, sustaining a firm growth throughout 2015, favored by the minimum interest rate scheme established by the BCRA in October last year.

• Effective July 27, the BCRA extended the coverage of the minimum interest rate scheme for fixed-term deposits. The amount of deposits reached by the measure increased from $350,000 to $999,999, and covers both those made by individuals and legal entities. In addition, it ordered an increase in minimum interest rates, which are the same for individuals and legal entities, and which implies an increase in yields of between 1 p.p. and 2.1 p.p., and between 4.7 p.p. and 7.6 p.p. for those holders, respectively. The new minimum interest rate structure favors longer-term deposits, by setting the 120-day LEBAC interest rate as a reference for placements of 90 days or more, while maintaining the 90-day LEBAC for deposits of up to 89 days.

• Interest rates on fixed-term deposits in pesos in the tranches of amounts included in the minimum interest rate scheme were aligned with the new values set, registering an increase compared to the previous month. Thus, the interest rate paid by private entities for fixed-term deposits of up to $100,000 and up to 35 days of term stood at 23.6% at the end of July.

• Towards the end of July, the Central Bank increased interest rates on its pass corridor, between 5 p.p. and 7 p.p. The measure seeks to limit the volatility of interest rates in the interfinancial market in the face of changes in the levels of short-term liquidity in the entities, by aligning the interest rate corridor and adapting it to the structure of the rest of the market rates. Thus, since July 27, the interest rates on passive passes for the Central Bank for the terms of 1 and 7 days have risen to 18% and 20%, respectively. Meanwhile, for active countries and for the same terms, interest rates are 23% and 24%.

• In July, loans in pesos to the private sector increased by 3.2% ($19.44 billion), the highest of the year and markedly higher than that observed in July 2014. Thus, they continued to increase their year-on-year rate of change, which went from 27.4% in June to 30.1%. The growth of the month was mainly driven by financing instrumented through documents and personal loans. In this context, the growth in deposits allowed the broad liquidity ratio in local currency (sum of cash in banks, the current account of the entities in the Central Bank, the net passes with such entity and the holding of LEBAC; in terms of deposits in pesos) to remain at high levels, standing at 39.1%.