Monthly Monetary Report

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

Summary

In March, the CPI for February was published, which showed a monthly increase of 2.4% for the general level and 2.1% for the core component. Although estimates and high-frequency indicators from state and private sources monitored by the BCRA indicate that core inflation in March will remain high, the BCRA considers that the acceleration of inflation in recent months is transitory, as it is due to corrections in regulated prices and the rapid depreciation of the peso between December and February. Once these transitory factors are overcome, inflation will consolidate its downward trend. For this reason, the BCRA decided to maintain its monetary policy interest rate, that of the center of its 7-day pass corridor, at 27.25%.

With the conviction that a depreciation greater than that already occurred would not be justified either by real economic impacts or by the planned course of its monetary policy and that, if not avoided, it would have the potential to slow down the disinflation process, the BCRA carried out foreign exchange interventions to sustain the value of the currency. Exchange rate intervention, however, is a sporadic complement and not a substitute for monetary policy. With his intervention, he managed to contain the dynamics that had been evident in the exchange rate.

Passive interest rates, which had already interrupted their upward trend at the end of December, remained stable during March. The TM20 – interest rate for fixed-term deposits of $20 million or more – of private banks averaged 23.3% in March and the BADLAR – interest rate for fixed-term deposits of $1 million and more, with a term of 30 to 35 days – of private banks averaged 22.8%. In the retail segment, the interest rate paid on fixed-term deposits of up to $100,000 and up to 35 days averaged 20.8% in the month.

Among the active interest rates, that of personal loans averaged 40.1%, showing a decrease of 0.3 p.p. compared to February, while the rate charged for signature-only documents averaged 26.7%, remaining stable compared to the previous month.

In March, the BCRA continued to conduct open market operations in order to manage the liquidity conditions of the money market. In this way, it sold LEBAC in the market for a total of VN $99.5 billion. In addition, the BCRA continued to issue Liquidity Bills (LELIQ), an instrument that began to be used on January 11 and gradually gained participation among the liquid assets of financial institutions. At the end of March, LELIQ’s outstanding balance reached VN $142,524 million. Thus, in March the expansion generated in the primary tender of LEBAC was more than offset by the absorption associated with the placement of LEBAC in the secondary market, the sales of LELIQ and the passive passes.

Real and seasonally adjusted private M3 showed a reduction of 0.2% in March, which was explained by the decrease in private sector means of payment and private sector fixed-term deposits.

Loans to the private sector continued to grow in real and seasonally adjusted terms. Total loans, in pesos and foreign currency, presented a monthly increase of 2% and accumulated an increase of 29.2% in the last 12 months. Growth in local currency loans was 1.5%, with a strong boost from mortgage and personal loans. Mortgage loans have been showing a growth rate of more than 6% in real terms since August last year, also showing an increase of 7.8% in March. In nominal terms, mortgages grew 8.8% ($12,800 million) and accumulated a year-on-year increase of 142%. UVA financing continued to account for more than 90% of loans granted to individuals. Thus, since the launch of this instrument, approximately $86,600 million of mortgage loans have been granted in UVA.