Monthly Monetary Report

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

Summary

• Monetary aggregates increased again in May. The average balance of total means of payment (M2) reached $168,840 million, registering an increase of 1.5% in the month, while the broad aggregate in pesos (M3) showed an increase of 1.5%, one of the highest values in the last twelve months.

• The greatest dynamism observed in the demand for money was verified in both the private and public sector aggregates. The working capital held by the public increased 1.3% and, in a month of heavy tax maturities where companies usually reduce their placements in order to meet their tax obligations, private deposits showed an increase of 0.5%, while those belonging to the public sector grew 4.1%.

• The Central Bank poured liquid resources into the market to consolidate its normal functioning, using the arsenal of countercyclical instruments that it has been developing in recent years. In May, the monetary expansion carried out by the BCRA was close to $ 3,000 million, its main components being the only partial renewal at maturity of LEBAC and NOBAC and other open market operations, together with the net purchases of foreign currency made during the month.

• Bank liquidity remained high during May, at levels similar to the previous month. The liquidity ratio measured as the sum of cash in banks, the current accounts of the entities in the BCRA and the (net) passes with the BCRA in terms of deposits in pesos remained on average at 23% and also considering the holdings of LEBAC and NOBAC by financial institutions. the ratio reached 36.5%.

• In this context, passive interest rates remained stable. The monthly average of interest rates paid by private banks to retail placements, for amounts of less than $100,000 remained at 12%, while the monthly average of interest rates paid by private banks in the wholesale tranche with a term of up to 35 days (BADLAR) stood at 12.8%. without registering variations with respect to the average of April. On the other hand, short-term lending rates did fall again, which has allowed a gradual but persistent reduction in bank spreads.

• Loans in pesos to the private sector showed a growth in their monthly average of 0.8% ($860 million) in May, driven by current account advances, personal loans and credit card financing, with a greater dynamism of private banks compared to previous months (they represented about 65% of the increase in the total balance).

• In order to provide hedging instruments in order to preserve credit dynamics, the Central Bank held the second auction of fixed interest rate swaps per variable (BADLAR private banks) for terms of 3 to 5 years. On this occasion, the proposals received ($280 million notional) practically doubled the total amount tendered ($150 million notional), and $50 million were awarded. This instrument helps to minimize the risks of interest rate movements by allowing banks to grant loans at a fixed rate and with terms longer than those currently observed in the market. At the same time, it acts as a reference for the term structure of long-term nominal interest rates.