Monthly Monetary Report

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

Summary

• The average balance of total means of payment (M2) stood at $162,070 million, after decreasing 0.5% in the month and accumulating a year-on-year growth of 17%. As a result of the reduction in private deposits in pesos in October, M2 accumulated
a 3.6% drop between the end of September and October. Similarly, while the average balance of total M3 remained almost unchanged from that of September, its balance at the end of October was 1.7% lower than at the end of the previous month. Likewise, the M3* (which includes the current currency held by the public and total deposits in pesos and foreign currency) showed an average monthly growth of 0.7%, maintaining its year-on-year growth rate at 18%.

• The evolution of private sector deposits during October should be considered in the context of extreme volatility in world markets. Despite the prevailing adverse context (capital outflows, portfolio changes, increased risk aversion), the demand for local money reacted in a relatively limited manner. Although the decrease in private deposits in pesos was similar to that of last May, during October private deposits in foreign currency increased (unlike what happened last May). This change of portfolio within the system reflects the public knowledge of the banking soundness conditions, strengthened over the course of recent years. Indeed, it should be noted that the Central Bank continued to provide liquidity, both in pesos and in foreign currency, to reduce the impact of external volatility on the local money market.

• Financial institutions continued to show high levels of liquidity. The bank liquidity ratio – defined as cash in banks, bank current accounts at the BCRA and passive passes for the BCRA, as a percentage of deposits in pesos – presented an average level of 20.5%. This level, although slightly lower than that of September, was almost 3 p.p. above the average recorded in the last 3 years. When also considering the holdings of LEBAC and NOBAC, the widest liquidity ratio stood at 38%. To facilitate the management of the most liquid assets in an environment that continues to be volatile, the Central Bank established a bimonthly period for the minimum cash position in pesos during October and November. At the end of the first month of this period, the entities accumulated a surplus of 0.4% of total deposits in pesos. In addition, at the end of October, the current regulations for the granting of financial assistance due to illiquidity were updated, adapting the criteria for granting and the characteristics of the financing.

• The interest rate operated in the interbank market increased by 3.8 p.p., registering an average of 13%, while the average of the BADLAR rate of private banks stood at 16.8%, with an increase of 4.6 p.p. compared to the average of September. There was also an increase in the interest rates paid by private banks to retail placements (for amounts of less than $100,000), which reached a monthly average of 12.7%, reaching a level of 15.3% at the end of October.

• Total loans to the private sector, considering those denominated in pesos and in foreign currency, increased by $3,610 million (2.8%) and their year-on-year growth rate stood at 30.1%, 0.6 p.p. below their level in September. In particular, loans in pesos to the private sector increased 2.2% ($2,410 million), with increases in almost all lines, highlighting loans granted through documents and lines mainly aimed at consumption. The year-on-year expansion rate of loans in pesos stood at 30.6%.