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) showed a growth of 2.5%, with increases in means of payment (M2) and fixed-term deposits. Among the factors that promoted the monthly increase were the BCRA’s purchases of foreign currency and the expansion of loans in pesos by the private sector. In year-on-year terms, the variation of M3 was close to 31%.

• Within the placements of the private sector, fixed-term deposits continued to stand out, increasing 4.4% and continuing to accelerate their year-on-year rate of expansion, reaching a variation of 36%. The average monthly increase was influenced by the statistical carryover from April, since May is a month in which an increase in this type of placement is not expected due to the high demand for liquidity from companies to face tax maturities. The average balance of operations of more than $1 million grew 4.8% in the month, which meant an increase of almost 6 p.p. in its year-on-year variation. On the other hand, deposits of less than $1 million continued to grow steadily during May (4%), favored by the minimum interest rate scheme for individuals established by the BCRA and by the stability in the foreign exchange market.

• The monetary base increased by 2.2% in May, with a growth in bank reserves (cash in financial institutions and balances in the current accounts of financial institutions in the BCRA) and in working capital held by the public. It should be clarified that on the occasion of the long weekend of May 25 followed by two days of bank strike, there was an exceptional increase in cash holdings, both held by financial institutions and held by the public. This has had an impact on the behavior of the monetary base, which in year-on-year terms grew 32.5%.

• The liquidity ratio of the segment in national currency (sum of cash in banks, the current account of the entities in the Central Bank, the net passes with such entity and the holding of LEBAC, in terms of total deposits in pesos) remained at high levels (39.6%), practically unchanged from last month.

• Loans in pesos to the private sector showed a growth of 2% ($11,590 million), similar to that of the previous two months and higher than that observed in May of last year. As a result, there was a new acceleration in the year-on-year variation, which went from 24.3% in April to 25.6% in the last month. Among the lines that drove growth for the month, credit card financing, personal loans and those instrumented through documents stood out.

• Passive interest rates fell slightly compared to the previous month. In particular, the BADLAR of private banks averaged 20.2%, decreasing 0.5 p.p. in the month, recording its second consecutive decline. On the other hand, according to the evolution of reference interest rates, the monthly average of the interest rate paid by private entities for fixed-term deposits of up to $100,000 and up to 35 days of term, stood at 22.7%, 0.2 p.p. below the level of April.

• Most interest rates applied to loans in pesos decreased. While the interest rates applied to financing through documents decreased 0.4 p.p. compared to April, that of loans with collateral fell 0.9 p.p. and that corresponding to personal loans fell 0.4 p.p.