Monthly Monetary Report

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

Summary

• In October, the broadest monetary aggregate in pesos (M3) showed a growth of 1.9% and maintained its year-on-year expansion rate stable at around 21%, with a generalized increase in all its components.

• The increase in fixed-term deposits in the private sector was explained by the impositions of the wholesale stratum, although from the date on which the minimum interest rate limit established by the BCRA for fixed-term deposits made by individuals came into force, there was an increase in placements in the retail segment. In fact, in order to favor savings instruments in national currency, on October 8, Communication “A” 5640 came into force, which established a minimum for the interest rates of fixed-term deposits made by individuals, provided that the total of the time placements per individual in each entity does not exceed the amount of the coverage of the guarantee insurance of deposits. The entry into force of the measure was reflected in the behavior of interest rates in the retail segment, which reversed the downward trend they had shown since April, exhibiting a significant monthly increase, to be above those received by wholesalers.

• Loans in pesos to the private sector showed a growth of 3.3% ($16,730 million), markedly higher than in previous months. This increase, greater than that observed in October last year, led to an acceleration in the year-on-year growth rate, which went from 20.5% to 21.1%. Consumer-oriented loans and document-based financing led the month’s growth. Among the factors that motivated the increase in these financings, it is worth mentioning the higher consumption associated with Mother’s Day, to which this year was added the boost from the “AHORA 12” program, which offers financing in 12 interest-free installments for the purchase of goods and services, and the credits granted within the framework of Pro.Cre.Auto. which since its inception, at the end of June, has accumulated placements of more than $2,000 million.

• The liquidity in pesos of financial institutions (sum of cash in banks, the current account of the entities in the Central Bank, net passes with such entity and the holding of LEBACs and NOBACs) remained at
high levels, and in October averaged 38.7% of total deposits in pesos, a ratio similar to that of the previous month. On the other hand, as of October, banks were allowed a reduction in the minimum cash requirement for
an amount equivalent to 16% of the financing granted within the framework of the “Ahora 12” programme.

• Likewise, at the end of October, the Central Bank relaunched the LEBACs in pesos that can be settled at the reference exchange rate. Although the bills will continue to be subscribed by exporters in the cereal and oil sector who have settled foreign currency through the Single and Free Exchange Market (MULC) for the equivalent in dollars of the amount to be subscribed, on this occasion the possibility of subscribing the securities was added in the case of settling in the MULC income from advances and export pre-financing in addition to those foreseen for their normal operations.

• In order to reduce volatility in shorter-term interest rates, at the beginning of the month the BCRA modified the interest rates for its pass operations. In the case of passive passes for the Central Bank
, the increase was between 4 p.p. and 4.5 p.p., with rates remaining at 13% and 14% for terms of 1 and 7 days, respectively. In the case of active countries, the increase was between 5 p.p. and 6 p.p., resulting in levels of 16%, 17% and 20%, depending on the terms are 1, 7 or 60 days, respectively. The interest rate curve of the Bills that the Central Bank places every week remained stable.

• International reserves increased by US$246 million in October and totaled US$28,111 million at the end of the month. During the month, a first tranche of the local currency swap agreement with the Central Bank of the People’s Republic of China was activated for the equivalent of US$814 million. It should be recalled that within the framework of this agreement, the BCRA may request additional exchanges for up to a maximum of close to US$11 billion
, which represents support for the implementation of its financial, exchange rate and monetary policy, in compliance with the mandates of the Organic Charter.