Monthly Monetary Report

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

1. Synthesis

• Total means of payment (M2) registered a monthly growth of 0.9% in October (31.2% YoY). The monthly increase was mainly driven by the high dynamism of loans in pesos to the private sector and, to a lesser extent, by the monetary effect of public sector operations, which were partially offset by the contraction generated by the Central Bank’s foreign exchange sales.

• Among deposits, private sector term placements stand out, which showed a growth of 1.6%, accelerating their monthly rate of expansion compared to September. In particular, fixed-term deposits grew in the last fortnight by more than $3,000 million (3%).

• Loans in pesos to the private sector grew 4.3% ($9,320 million) in October, with increases in all lines, and with a year-on-year increase that remains around 52%. The year-on-year growth rate of commercial loans (57.2%) has been higher since the last quarter of 2010 than that recorded for consumer loans (49.0%).

• Financial institutions reduced their liquidity surpluses, due to decreases in their balances of net passes with the Central Bank and in their holdings of LEBACs and NOBACs (by the equivalent of 0.2 p.p. and 0.7 p.p. of deposits in pesos, respectively). Meanwhile, the assets of the banks that are computed as part of the reserve requirements (cash holdings and current account balances in the BCRA) remained stable, exceeding the requirement by 0.4 p.p. for deposits in pesos.

• The Central Bank continued to intervene in the foreign exchange market to limit the volatility of the exchange rate and facilitate the necessary liquidity, only partially renewing the LEBAC and NOBAC that were maturing, or carrying out buybacks in the secondary market. In the same sense, and in order to promote savings in pesos, the BCRA validated increases in the cut-off interest rates of the LEBACs that it tenders weekly, through an increase in the cut-off interest rates of around 0.6 p.p. for all terms.

• In line with the behavior of interest rates on Central Bank securities, the main interest rates in the money market continued their upward trend. Among passive interest rates, the BADLAR of private banks averaged 17.6% in October, showing an increase of 4.5 p.p. compared to September, while the interest rate of private banks in the segment of up to $100 thousand and short-term was on average 11.7%, 1.5 p.p. above that observed the previous month. In relation to lending rates, there were greater increases in shorter-term commercial lines, the one corresponding to discounted documents registered a monthly increase of 5.7 p.p., standing at 21%, and that of current account advances for amounts greater than $10 million and up to 7 days of term increased 5.2 p.p. to reach 18.2%. On the other hand
, the interest rate on personal loans and that of collateral financing rose 1.1 p.p. and 1 p.p. to reach levels of 31.4% and 20.5%, respectively.

• Interbank market interest rates showed greater volatility. As in July and September, transitory increases were again recorded in the middle of the month, which, although more pronounced, were reversed after a few days, converging to the levels established by the Central Bank in its pass operations.

• The MERVAL index registered a rise of 17.9% to 2,906 points, managing to reverse much of the fall recorded in August and September. There were also significant improvements in the price of public securities. Bonds in the middle and long section of the curve were the best performers, with increases of 15.1% for dollar-denominated species and 11.6% for bonds in pesos, while bonds in the short section of the curve, both in pesos and dollars, registered an increase of around 9.6%.