Monthly Monetary Report

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

Summary

• During the month of June, the broadest aggregate in pesos (M3) showed a growth of 29.5% YoY, 1.1 p.p. above the previous month. The monthly increase in this aggregate was mainly explained by the Central Bank’s purchases of foreign currency and loans in pesos to the private sector.

• Fixed-term deposits in the private sector grew 1.8% in the month, showing one of the highest increases in recent years. This increase was essentially driven by placements from the wholesale stratum (which correspond to deposits of $1 million and more).

• Loans in pesos to the private sector registered an increase of 3.9% ($10,400 million) in June, well above the growth observed in the first five months of the year (1.9% on average). Thus, the year-on-year rate of change, which had been showing a gradual slowdown since October 2011, remained at 42.9% in the last month. When breaking down the month’s growth into the percentage points explained by each of the main lines, it can be seen that those destined to finance commercial activities were the ones that contributed the most to growth with 2.3 p.p., while consumer loans contributed 1.3 p.p. and loans with real collateral 0.3 p.p..

• In this context, ample liquidity (defined as the sum of current account balances at the Central Bank, cash in banks, holdings of LEBAC and NOBAC and balances held in passes at the Central Bank) fell by 1.3 p.p., to 37.2% of deposits in pesos, mainly due to the decrease in passive passes for the Central Bank.

• Short-term passive interest rates increased in the wholesale segment, while they remained relatively stable for smaller deposits. The BADLAR rate of private banks – time deposits of more than $1 million and with a term of 30-35 days – averaged 12.2% in June, registering a monthly increase of 0.4 p.p.. Meanwhile, in the retail segment, the interest rate paid by private banks for their fixed-term deposits (up to $100,000 and up to 35 days) remained at 11.1%, unchanged from the average for May.

• Interest rates on loans to the private sector continued to decline. The fall was led by the rates of the lines intended to finance commercial activities and, mainly, those with shorter terms, as has happened in recent months. In particular, the monthly average interest rate on documents discounted to companies stood at 16.7%, falling 0.8 p.p. in the month; while that of single-signed documents averaged 17.3% in June, standing 0.5 p.p. below the average recorded in May. In turn, the interest rate on current account advances stood at 20.4%, falling 0.6 p.p. in the month. Meanwhile, the interest rate on personal loans registered a decrease of 1.2 p.p. in June, averaging 33.5%.

• In the foreign currency segment, the average monthly balance of total deposits decreased 16.3% compared to the average for May, mainly due to the fall in private sector placements. It should be mentioned that the daily fall in this type of placement gradually reduced throughout June and that liquidity in foreign currency remained high, at a level equivalent to 62.9% of total deposits in dollars. It is important to remember that, as a result of the prudential policies implemented in recent years (which restrict debtors who are eligible to
receive financing in foreign currency to those who have income in that currency), the Argentine financial system has a low degree of dollarization and a very low level of currency mismatch.