Monthly Monetary Report

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

Summary

• In June, the gradual normalization of the money market that had begun at the end of the previous month deepened, as a result of the series of actions promoted by the Central Bank to address financial volatility. In particular, private deposits resumed an upward trajectory, with an increase between the end of May and June of around $2,100 million. An important part of this increase, around $1,200 million, was made up of the rise in time deposits, among which the increase in wholesale deposits persisted. On the other hand, retail term placements resumed their growth from mid-June.

• The average of the means of payment (M2) was around $156,120 million in June, determining that once again, and for twenty consecutive quarters, the BCRA’s Monetary Program was fulfilled. On this occasion, and as a result of an atypical evolution of deposits during the quarter, M2 stood at just over $2,200 million above the lower limit of the band established for the month.

• Within the framework of the risk management approach where a base scenario is established and deviation probabilities are assigned, in recent months a misalignment of the demand for money has been observed. In order to restore balance, the Central Bank acted, in the first place, to stabilize the exchange market. Subsequently, liquidity was injected, both in pesos and in foreign currency, using existing mechanisms and generating new instruments. In fact, in June it continued to partially renew the maturities of LEBAC and NOBAC, while carrying out repurchase operations in the secondary market. It also continued to offer funds, pesos such as dollars, through active passes, although there was no significant demand for resources in this way. Finally, in the month under analysis, the Central Bank enabled a liquidity window that allows financial institutions to take funds with a guarantee of Guaranteed Loans or Bogar 2020. However, so far banks have not used this new mechanism.

• The most restricted liquidity indicator – defined as cash in banks, bank current accounts at the BCRA and passive passes for the BCRA, with respect to total deposits – remained at a very high level, around 19%, which implies an increase of 0.2 p.p. compared to the level recorded in the previous month. In June, there was a transfer from liquidity held in passes at the BCRA to current accounts at this institution, within the framework of the bimonthly period (June-July) to meet the reserve requirements. On the other hand, once it was verified that the June-July bimonthly position duly arranged did not generate excessively precautionary conduct on the part of the banks, which could affect the stability of interest rates, the surplus positions of June were allowed to be carried over to July. These surplus positions accumulated in June represent the equivalent of 1% of total deposits, leaving banks in a very comfortable position to face the seasonal increase in liquidity demand that occurs in July (derived from Christmas bonuses and winter vacations).

• Short-term interest rates, which react more quickly to the situation, began to fall from the first week of June. In particular, the BADLAR of private banks, after reaching 18.4% on June 3, gradually declined for the rest of the month, to stand at 16.2% at the end of the
month. Similarly, after a brief period of increase at the beginning of the month, the rate operated in the interbank lending market between private entities ended the month at the “floor” of the pass rate corridor established by the Central Bank (8.75-11% for 1-day passive passes and 7-day active passes, respectively).