Monthly Monetary Report

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

1. Synthesis

• In March, total means of payments (M2) reached an average of $197,620 million, registering a growth of 18% YoY, and being close to the midpoint of the range established in the Monetary Program for the first quarter of 2010. In the same sense, private means of payment (private M2) were within the (indicative) estimates of the Monetary Program (15.8% YoY-22.6% YoY), showing an average balance of $168,370 million (20% YoY) and a monthly reduction of 0.4%.

• Total private deposits grew by 0.8%, driven mainly by fixed-term deposits (2%). Regarding the latter, the increase was evident in the wholesale segment (more than $1 million). However, although fixed-term deposits in the retail segment remained at levels similar to those of February, during the second half of March they again showed a slight positive trend.

• In March, there was a change in the composition of financial institutions’ liquidity towards longer-term assets: LEBACs and NOBACs. On the other hand, and as a result of the end of the quarterly calculation period of the minimum cash, there was an increase in the holdings of those assets with which the reserve requirements are integrated (current accounts at the Central Bank and cash). On the other hand, there was a decrease in the liquidity maintained in passes with the Central Bank.

• Loans in pesos to the private sector accelerated their pace of expansion, showing a generalized increase in all their lines. The average balance stood at around $122,200 million, 1.2% ($1,540 million) above the average of the previous month, registering a year-on-year variation of 12.5%. Loans mainly for consumption experienced a monthly increase of 1.4% ($740 million), with a recovery in financing through credit cards, which accompanied the growth of personal loans. Meanwhile, loans destined to finance mostly commercial activities increased 1.2% ($555 million) in the month, driven mainly by those instrumented through documents.

• The most relevant short-term interest rates in the money market remained relatively stable in March. The monthly average interest rate on interbank loans stood at 8.6%, while the BADLAR of private banks averaged 9.4% for the month. Meanwhile, in the segment of term placements of up to $100,000, up to 35 days, private banks paid an average interest rate of 8.9%.

• Interest rates charged on loans to the private sector registered slight decreases in almost all lines. Among commercial loans granted by private banks in Capital and GBA, the average interest rate of current account advances with prior agreement, granted to companies, for up to 7 days of term and for amounts greater than $10 million, stood at 10.2% with a slight decrease (0.1 p.p.), compared to the average observed in February. The average rate of discounted documents (the most traded modality) would have decreased 0.4 p.p. compared to February, reaching a level close to 13.3%. Meanwhile, interest rates on personal loans continued to fall (0.3 p.p.) and reached a level of around 30.8%, while the monthly average for January, the latest information available, of credit card financing throughout the country stood at 31%, with a decrease of 0.5 p.p. compared to December.