Monthly Monetary Report

Executive summary

In July, a bill was submitted to the National Congress to amend the Charter of the BCRA. The bill establishes the preservation of the value of the currency as the primary and fundamental mission of the BCRA, modifies key aspects of its institutional design, and changes the mechanisms for removing its authorities. In addition, the bill prohibits financing the National Treasury through temporary advances, eliminates mechanisms for transferring reserves, and limits the distribution of profits to realized, liquid earnings, after establishing the pertinent reserves. In this way, the bill promotes interaction between the BCRA and the National Treasury, prohibiting monetary authority financing of the government in order to avoid monetary expansions not backed by greater money demand. As a transitional measure, profits may be distributed according to the current criterion, provided they are used to settle outstanding balances of temporary advances and non-transferable bills. This would complete the process of cleaning the BCRA’s assets of items that are not realizable, thus strengthening its capacity of preserving the value of the currency.
Transactional money demand continued recovering in a context of consolidation of the disinflation process. In July, transactional private M2 grew by 1.8% s.a. in real terms, expanding for three consecutive months. In the interest-bearing segment, private sector time deposits declined by 0.4% in real and seasonally adjusted terms. Thus, private M3 posted a slight fall at constant prices.
In turn, the monetary base improved by 0.2% s.a. in real terms, after contracting for 10 months in a row. In nominal terms and in the month-on-month end-of-period comparison, it showed a ARS0.5 trillion rise. On the supply side, the expansion was explained by the BCRA’s net purchase of foreign currency from the private sector—which was in part offset by National Treasury operations—and, to a lesser extent, by BCRA operations in the secondary market.
Loans in pesos to the private sector increased in real and seasonally adjusted terms (1.2%), once again driven by business loans. In terms of GDP, bank credit in pesos remained at 9.2%, and reached 12.5% together with loans in foreign currency, which continued showing great dynamism.