Monthly Monetary Report

Executive summary

In July, a Bill to Reform the Central Bank’s Charter was sent to Congress, establishing the preservation of the currency’s value as its primary and fundamental mission, modifying central aspects of its institutional design and the mechanisms for removing its authorities. The project prohibits financing the National Treasury through Temporary Advances (AT), eliminates reserve transfer mechanisms, and limits the distribution of profits to those that are realized and liquid, following the constitution of the corresponding reserves. In this way, interaction between the Central Bank and the National Treasury is fostered, in which financing from the monetary authority to the government is prohibited with the aim of not generating monetary expansions unsupported by a higher money demand. Additionally, it is proposed as a transitional measure that profits may be distributed according to current regulatory criteria, provided it is to cancel outstanding balances of AT and Non-Transferable Bills. This would complete the cleaning of the BCRA’s assets of those without realizable value, strengthening its capacity to preserve the value of the currency.

Transactional money demand continued to show a recovery in a context of consolidation of the disinflation process. In July, private transactional M2 recorded a growth of 1.8% in real and seasonally adjusted terms, accumulating three consecutive months of expansion. In the interest-bearing segment, private sector time deposits contracted 0.4% in real and seasonally adjusted terms. Thus, private M3 recorded a slight drop measured at constant prices.

For its part, the Monetary Base expanded 0.2% s.a. in real terms, after ten consecutive months of contraction. In nominal terms and comparing end-of-month balances, it recorded an increase of $0.5 trillion. From the supply side, the expansion was explained by the net purchase of foreign currency from the private sector by the monetary authority, partially offset by National Treasury operations and, to a lesser extent, by BCRA operations in the secondary market.

Loans in pesos to the private sector grew in real and seasonally adjusted terms (1.2%), driven again by commercial loans. In terms of GDP, bank credit in pesos remained at 9.2% and, together with foreign currency loans, which have been showing great dynamism, the ratio stood at 12.5%.