Monthly Monetary Report

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

1. Synthesis

• In June, the total means of payments (M2) were within the targets established in the Monetary Program, in an environment close to the base scenario. With an average monthly balance of $283,730 million, M2 accumulated a growth of 12.6% compared to December, 0.9 p.p. above that projected in the base scenario of the Monetary Program and 3.5 p.p. below its upper limit. In turn, so far in 2011 the cumulative growth of private M2
shows a trajectory compatible with the annual target set for December of this year.

• As in May, the monthly growth of monetary aggregates during the month of June was mainly driven by loans in pesos to the private sector, which continued to show a sustained and high rate of expansion. Other factors that contributed to explain the monthly increase in monetary aggregates were the Central Bank’s purchases of foreign currency in the market and, to a lesser extent, public sector operations.

• Private sector fixed-term deposits grew by 0.5%, mainly explained by the segment of placements of less than $1 million. This behavior of private sector time deposits is similar to that observed in previous years during the month of June. However, if we consider the performance of fixed-term deposits during the first half of the year, it can be seen that 2011 reached the highest growth rate in recent years.

• Loans in pesos to the private sector continued to show great dynamism. In June they increased 4.1% ($7,500 million) and reached a year-on-year variation of 43.4%, 1.6 p.p. more than that recorded in May. Although generalized increases were observed in all lines, mainly commercial financing stood out again, which since the last quarter of 2010 has grown above the lines intended to finance household consumption.

• Liquidity in pesos of financial institutions totaled 40.8% of total deposits in pesos, 0.9 p.p. less than in May, in line with the increase in the granting of loans in pesos. In particular, among the components of bank liquidity, it was observed that the level of assets destined to meet the reserve requirement and the LEBAC and NOBAC, in terms of deposits, remained practically unchanged in relation to May, while net passes with the BCRA decreased.

• Interest rates on LEBAC and NOBAC placements remained relatively stable, while interest rates on pass operations remained unchanged. In this context, passive interest rates remained relatively stable while lending rates showed limited variations. In particular, the monthly average of the BADLAR rate of private banks stood at 11.3%, while that corresponding to deposits of up to $100 thousand averaged 9.5% per month. On the other hand, among lending rates, the average monthly interest rate on current account advances was around 18.4%, down 0.5 p.p. compared to May, while the average monthly interest rate on signature-only documents stood at 15%, 0.6 p.p. below the previous month.