Monthly Monetary Report

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

Summary

• In May, the broadest monetary aggregate in pesos (M3) reached $783 billion, which implied a growth of 2.1%. In year-on-year terms, M3 continued to soften its rate of expansion, reaching a variation of 33%, which was 0.7 p.p. lower than that recorded in April. The month of May usually has a distinctive behavior explained by the strong tax maturities that produce a transfer of resources from the private sector to the public, which is seen in an increase in public sector deposits and a certain slowdown in the growth of private sector placements. The growth of loans to the private sector continued to be the main factor explaining the expansion of monetary aggregates, followed by the Central Bank’s purchases of foreign currency.

• The correlation of the aforementioned transfer of deposits from the private sector to the public sector is the reallocation of bank liquidity from private to public banks. Thus, while the broad liquidity ratio for all entities practically did not change compared to the previous month (it fell 0.2 p.p. and stood at 33.3%), there was an increase in liquidity in public banks (1.1 p.p.) and a decrease in private financial institutions (-1.4 p.p.).

• Loans in pesos to the private sector continued their dynamism with a monthly growth rate of 2.8% ($10,245 million), which represents an acceleration in their rate of expansion that exceeds the increase observed in the same month last year. Thus, the year-on-year rate of change of loans registered an increase of 0.6 p.p. compared to April and stood at 42.8%. The increase in the month was mainly driven by financing instrumented with documents and personal loans.

• Distinguishing the total number of loans in pesos to the private sector by type of recipient shows a virtuous performance in the financing of productive activity originating in the measures deployed to facilitate companies’ access to bank loans. Since 2012, loans granted to legal entities have grown above those to individuals, presenting in April 2013 (latest available information) a year-on-year rate of change of 54.5% and 33.4%, respectively. As a result, loans to legal entities increased their share of the balance of loans in pesos to the private sector.

• The redistribution of liquidity among the different groups of financial institutions (typical of the seasonality of the month of May) in a context of sustained growth in loans to the private sector generated a transitory increase in shorter-term interest rates. This increase was more pronounced in the interfinancial market. The average interest rate on 1-business day operations in the call market increased 2.4 p.p., standing at 13.6%. In turn, the average interest rate of 1-business day operations between financial institutions in the REPO round grew 3.4 p.p., standing at 14.2%. However, the increases were transitory and these interest rates ended May at levels similar to those observed in April.

• Among the interest rates on loans to the private sector, the interest rate on advances to companies of up to 7 days was the one that was most influenced by the specific liquidity conditions and its average monthly value increased by 2.6 p.p.. The rest of the lending rates showed more limited increases, with the exception of those corresponding to the lines granted with real guarantee, which remained relatively stable compared to April. Interest rates paid by private financial institutions on time deposits also increased in May. As usual, this increase was led by the rates of the wholesale segment and the BADLAR of private banks averaged 15.7%, registering an increase of 0.7 p.p. in the month. In the retail segment, the interest rate paid by private banks for their fixed-term deposits up to $100,000 and up to 35 days averaged 13.5%, increasing 0.3 p.p. in the month.