Monthly Monetary Report

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

1. Synthesis

• The behavior of monetary variables during May, as usual, was influenced by the concentration of tax payments, mainly income tax. This is reflected in the money market in an increase in public sector impositions and a decrease in the growth of private sector deposits, especially in fixed-term deposits. It also affects the behavior of credit, particularly commercial credit (current account advances and, to a lesser extent, document discounting). All this resulted in a change and a redistribution of liquidity, between public and private banks.

• In fact, the broad monetary aggregate (M3) registered growth of 2.7% in May (40.5% YoY). Among its components, public sector deposits stand out, which showed a significant increase (4.6%), and in particular, public sector demand deposits, which grew 9%. On the other hand, private means of payment (private M2) grew 2.3% (38.6% y.o.y.) in the month, with increases in both public working capital and demand deposits. Thus, total means of payment (M2) reached an average balance of $277,200 million in May and registered a monthly growth of 3.1% (37.9% YoY).

• Private sector fixed-term deposits moderated their monthly growth, showing an increase of 1.8%, but accelerated their year-on-year rate of expansion again (by 1.8 p.p.) to reach 38.1%. The lower growth rate, seasonally expected, was observed mainly in the wholesale segment and was linked to the aforementioned tax payment.

• Loans in pesos to the private sector showed a substantial increase in their monthly growth rate in May, of 4.2% ($7,400 million), and maintained a year-on-year growth above 40% for the fourth consecutive month. When differentiating by main lines, it can be seen that since the last quarter of 2010 commercial companies have continued to grow above those intended to finance household consumption, a promising event that has not occurred since the end of the 2001-2002 crisis.

• In May, a new tender for funds from the Bicentennial Productive Financing Program (PFPB) was held, which aims to improve the supply of credit for investment and productive activity with a total financial cost fixed in pesos. On this occasion, $280 million were awarded, bringing the total awarded since the beginning of the PFPB to $1.537 billion.

• Private banks reduced the balance of passes and LEBACs and NOBACs to meet the greater granting of loans to the private sector in a month with lower growth in private sector deposits. Meanwhile, public banks saw an increase in public sector deposits as a result of the collection of the aforementioned tax, which was reflected, temporarily, in an increase in the liquidity of such entities. As a result of both effects, the liquidity ratio (calculated as the sum of cash in banks, bank balances in current account at the BCRA, net passes with the BCRA and holdings of LEBACs and NOBACs in terms of total deposits in pesos) fell 0.5 p.p. compared to April and stood at 41.7%.

• In May, the Central Bank did not modify the interest rates of its pass operations. Banks’ passive interest rates remained relatively stable, while active interest rates registered a mixed performance, with decreases, mainly in credit card financing, some slight increases, as in the case of collateral loans, mortgages or signature documents, and with the rest of the lines relatively stable.