Monthly Monetary Report

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

Summary

• The BCRA’s policies have demonstrated the capacity to generate stability in monetary, financial and exchange rate variables. Having overcome several episodes of turbulence, the persistence of these policies has made it possible to change the expectations of economic agents. As a result of this unprecedented event in recent decades, there have been improvements in monetary and financial variables and a gradual recovery in the level of activity, which led to monetary aggregates beginning to travel a growth path since the middle of the year. In October, this trend persisted and M2 registered an average monthly balance of $179,150 million, which implies an increase of 0.3% compared to September and 10.5% compared to October of the previous year. For its part, the broader monetary aggregate in pesos, M3, showed a growth of 1% compared to the previous month and 4.1% compared to October 2008.

• Private sector deposits in pesos increased 2% compared to September, with growth in both demand and time placements. The increase in time deposits reached $1,600 million and was concentrated in the retail deposit segment (up to $1 million). However, in the second half of October, wholesale fixed terms showed renewed dynamism.

• The proportion of liquid assets in pesos (current accounts at the Central Bank, cash, net passes with the Central Bank and LEBAC and NOBAC) of banks in terms of deposits in the same currency amounted to 36.3%. As in September, a decrease in the net position of passes with the Central Bank was observed, which was more than offset by the increase in holdings of LEBAC and NOBAC.

• In the context of financial stability and the recovery of the demand for money prevailing in the local economy, the Central Bank continued with its countercyclical policy, through a further reduction of 0.25 p.p. in interest rates for pass operations. Interest rates on passive passes were set at 9% and 9.5%, for 1 and 7 days, respectively, while interest rates on 1-day and 7-day active passes were set at 11% and 11.5%, respectively. Thus, in the last four months, reference interest rates have accumulated a reduction of 1.5 p.p..

• Short-term interest rates in the local market decreased in accordance with the cut in reference interest rates ordered by the Central Bank. In the most dynamic segment of the interbank lending market, that of 1-business day operations, a decrease in average interest rates of 0.3 p.p. was observed. compared to September. Meanwhile, the monthly average of the interest rate paid by private banks in the wholesale tranche of deposits of up to 35 days (BADLAR) stood at 11.8%, with a decrease of 0.4 p.p. compared to September. On the other hand, among the interest rates charged for loans, the one applied to current account advances with prior agreement, granted to companies, for up to 7 days of term for amounts greater than $10 million, fell 1.5 p.p. compared to the average observed in September, standing at 12.4%.

• Loans in pesos to the private sector show a gradual acceleration in their growth rate, with a particularly dynamic evolution in financing for consumption. In fact, in October the growth of total loans in pesos to the private sector was around $1,200 million, exceeding 1% monthly variation for the first time since July.

• In October, the Central Bank held a new auction for fixed-per-variable interest rate swaps (BADLAR private banks), one of the mechanisms it has implemented to boost longer-term credit. On this occasion, the proposals received ($260 million notional) far exceeded the total amount tendered ($150 million notional), being awarded $60 million. Awards were made in all the bidding sections and the cut-off interest rates were 15%, 15.75% and 16.5%, for the 3, 4 and 5-year contracts, respectively.