Monthly Monetary Report

Summary

• In November, the broader monetary aggregate in pesos (M3) maintained its relatively stable year-on-year expansion rate at around 36%. This behavior was explained by an acceleration in the year-on-year variation of the broad aggregate in pesos of the private sector (private M3), offset by the moderation of the year-on-year growth of public sector deposits. In particular, the monthly growth of private M3 was 2.4%, with increases in all its components. On the supply side, among the factors that contributed to the expansion of the M3, loans in pesos from the private sector stood out, which once again showed high growth.

• Private sector fixed-term deposits increased 2.7% in November, driven by the wholesale segment, although retail deposits also grew. In year-on-year terms, fixed-term placements in the private sector accumulated a growth of 49%.

• In November, loans in pesos to the private sector maintained a high rate of expansion, with a monthly growth of 4.4% ($30,830 million), which was similar to that of October and exceeded that of the same period in other years. Thus, the year-on-year growth rate registered an increase of 3.1 p.p. and stood at 36.7%. The monthly increase was composed of both the lines mainly associated with the financing of commercial activities (advances, documents and other loans) and those essentially oriented to household consumption (personal and credit cards).

• The growth in deposits allowed the liquidity ratio of financial institutions in the local currency segment (sum of cash in banks, the current account of the entities in the Central Bank, net passes with such entity and the holding of LEBAC, as a percentage of deposits in pesos) to remain relatively stable even in the context of loan growth mentioned above. Thus, liquidity remained at 36.8% of deposits in pesos, although with a change in its composition, with a lower holding of LEBAC offset by an increase in the rest of its components.

• In order to continue promoting savings in national currency, on October 27 the Central Bank decided to increase by 300 basis points the remuneration of LEBACs in pesos at a predetermined interest rate, which generated an increase in the minimum remuneration that savers receive for their fixed-term deposits of up to $1 million as of November. Thus, 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 26.2%, showing an increase of 2.7 p.p. On the other hand, in the wholesale segment, the average of the BADLAR – interest rate for fixed-term deposits of $1 million and more, with a term of 30-35 days – of private banks increased 1.8 p.p. compared to October.

• Interest rates on loans to the private sector showed mixed movements. While interest rates on current account advances decreased, those applied to financing via documents increased; and those corresponding to personal loans remained relatively stable.

• In the days prior to the publication of this report, the BCRA adopted a set of measures that will be effective from that moment on. These provisions include the normalization of the operation of the foreign exchange market, the modification of the procedures for bidding LEBACs in pesos and dollars, the relaunch of LEBACs in pesos adjustable by the reference exchange rate, the incorporation of the NOBAC offer in dollars and the change of the limits of the Net Global Position in foreign currency of financial institutions. Likewise, increases in the interest rates of LEBACs in pesos were validated and the limits that were in force on passive and active interest rates were eliminated. In addition, the partial conversion to dollars of the yuan corresponding to the currency swap agreement between the BCRA and the People’s Bank of China was agreed. For its part, the National Treasury agreed to transfer to the BCRA new issuances of BONAR 2022, BONAR 2025 and BONAR 2027 to replace the Non-Transferable Bill maturing in 2016.