Monthly Monetary Report

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

1. Synthesis

• In May, the price indices for April were released. According to INDEC’s GBA CPI, the general level of retail prices increased 2.6%, while its core component grew 2.3%. In both cases, the growth was higher than that recorded in March. On the other hand, in other jurisdictions the price increase slowed down in April and was lower than that computed by the GBA CPI. The high-frequency indicators monitored by the Central Bank indicate that in May the path of disinflation would have resumed.

• In this scenario, the BCRA decided to keep its monetary policy rate, the center of the 7-day pass corridor, unchanged at 26.25%. Thus, the 7-day pass corridor remained at 25.5%-27%.

• As it has been doing since the beginning of March, in May the BCRA absorbed liquidity through open market operations. It sold LEBAC in the secondary market for a total of VN $166.9 billion, which generated a monetary absorption that more than compensated for the partial renewal of maturities in the primary market and the expansion associated with the fall in the balance of passive passes.

• Money market interest rates remained stable over the course of May. Thus, interest rates in the interfinancial lending markets remained at the lower limit of the Central Bank’s pass corridor and both active and passive rates remained at levels similar to those they had reached at the end of April.

• The Central Bank’s counterparties in the LEBAC market were both banks and buyers from the non-financial sector. Thus, the non-financial private sector continued to increase the proportion of its savings held in these securities.

• Considering its seasonally adjusted value, the real balance of private M2 remained the same
as in the previous month, while the private sector’s time deposits in pesos decreased,
which explained the monthly reduction in the real and seasonally adjusted balance of private M3. In
nominal terms, monetary aggregates have remained very stable so far this
year.

• The bank liquidity indicator in local currency (current account at the BCRA, cash,
LEBAC balance and passes at the BCRA, in terms of deposits) remained at 45.4% since, although
financial institutions bought LEBACs, they also reduced their pass and cash balances.

• Loans to the private sector continued to increase in both nominal and
real terms. In the peso segment, although personal loans accounted for most
of the real increase, mortgage and pledge loans were the lines that grew the most in
absolute terms and the ones that show the most abrupt change in their trajectory, having reversed
several years of consecutive declines. In the case of mortgage loans, their greater dynamism has
been favoured by UVA-denominated loans. In nominal terms, they grew 4.2%
($2,820 million) in the month and 28.3% in the last twelve months. With regard to UVA financing
, since the launch of this instrument, approximately $11,160 million have been granted ($7,460 million for mortgages and $3,700 million for pledges and personals).