Monthly Monetary Report

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

• On November 7, the BCRA decided to increase its monetary policy rate by 100 bps, bringing it to 28.75%. Although the high-frequency indicators at the time of making the decision continued to indicate a decrease in core inflation, the BCRA considered that it was still above the level sought. Monthly inflation in October was 1.5% for the general level and 1.3% for the core component, showing a decrease compared to September’s values.

• The Central Bank continued to conduct open market operations in order to manage the liquidity conditions of the money market. In this way, it sold LEBAC in the secondary market for a total of VN $68.7 billion, which offset the expansion associated with the primary tender. The increase in the reference rate produced a new upward shift in the LEBAC curve, with monthly increases in yields of 125 bps for the 30-day species and 130 bps for species with a residual term of around 80 days.

• Interest rates in the interfinancial lending markets were immediately adjusted to the new levels set for the monetary authority’s pass operations and remained within the BCRA’s pass corridor. In turn, passive rates grew more rapidly and since October 24 – the first of the last two dates on which the BCRA increased the policy rate – both the BADLAR of private banks and the rate paid for deposits up to 100 thousand increased by more than 150 bp.

• In this context, the private sector’s time deposits in pesos increased in real terms for the second consecutive month and became the component of private M3 (which includes the working capital held by the public and the total deposits in pesos held by the private sector) that grew the most, with an increase in both the wholesale and retail segments.

• Loans to the private sector continued their upward trend in real and seasonally adjusted terms. Total loans in pesos grew 1.9% in real terms and although increases were registered in most lines, mortgage loans continued to stand out, with an average monthly increase of 7.6% in real terms in the last three months.

• In nominal terms, mortgages registered a monthly increase of 9.3% ($9,300 million), and in the last twelve months they accumulated a growth of 91%. It should be noted that UVA financing continues to gain share of total loans to individuals, totaling just over 90% of the total in the last month. Thus, since the launch of this instrument, approximately $44,800 million of mortgages have been granted in UVA.

• In this way, the granting of loans to the private sector once again exceeded the growth of deposits, so that the liquidity of financial institutions in the segment in local currency (measured as the 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 LEBACs, as a percentage of deposits in pesos) continued to decline, reaching 38.5% of deposits, as banks continued to reduce their holdings of LEBACs. When considering the surplus bank liquidity (sum of LEBACs and passes), it is observed that despite having decreased in recent months, it is still equivalent to 21% of deposits, although its distribution among financial institutions is heterogeneous.