Monthly Monetary Report

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

1. Synthesis

• The total of the means of payment in pesos (M2) was in the center of the range established in the Monetary Program for this month. In fact, the quarterly growth rate of M2 was 4.7%, 0.6 p.p. lower than that projected in the base scenario of the Monetary Program (5.3%). For their part, private means of payment (private M2) showed a monthly increase of 0.7% in March. This variation is consistent with the base scenario of the Monetary Program, which establishes an annual target for December 2011 of 29.2%.

• Continuing with the policies of control of monetary aggregates and managed floating of the exchange rate, in the month the Central Bank sterilized, through LEBAC and NOBAC and Passes, almost 70% of the primary expansion generated by its purchases of foreign currency in the market and the monetary effect of the public sector.

• The strengthening of the demand for private money was reflected in a significant growth in fixed-term deposits. Private sector deposits currently reach an average monthly balance close to $90,000 million and accumulate in the last twelve months the largest expansion since the exit from convertibility, with a year-on-year growth of 33.3%. This strong increase is evident in both wholesale and retail placements.

• With the effects of the summer recess dissipated, loans in pesos to the private sector showed an acceleration in their monthly expansion rate in March. In this way, and with generalized increases in all its lines, credit in pesos to the private sector registered an increase of 2.2% ($3,730 million) in March, while its year-on-year growth rate continued to increase, reaching 41.6% in the last month, a value similar to the peaks reached at the beginning of 2008. This growth continues to be led by commercial loans, which since September 2010 have been growing above the lines intended to finance household consumption.

• In the primary LEBAC and NOBAC markets, the average term of placements was extended, with priority given to notes with maturities ranging from one year to one and a half years. The margins on BADLAR of Private Banks continued their downward trend of recent months, while the cut-off interest rates of the LEBACs did not register significant changes compared to the previous month. The Central Bank maintained interest rates on 1- and 7-day pass-through operations at 9% and 9.5%, respectively. For their part, those corresponding to active passes continued at 11% and 11.5% for the same terms.

• Interbank market interest rates, as well as the main passive interest rates, remained stable. On the other hand, lending rates behaved differently in March, with increases in some lines (such as the case of advances, whose rate increased by 0.8 p.p. in the month) and falls in others (such as credit card financing, whose interest rate was reduced by 1 p.p.).

• During March, 10 placements of negotiable obligations (ONs) were registered in the private debt market, for a total amount subscribed of $1,290 million, becoming the highest amount recorded for a first quarter in recent years.