Monthly Monetary Report

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

Summary

In September, the average monthly balance of deposits in pesos in the private sector remained almost unchanged from the previous month in nominal terms. Its stability was the result of an increase in demand deposits (8.4% nominal; 9.1% nominal seasonally adjusted), offset by a fall in term placements (-5.6% nominal; -5.3% nominal seasonally adjusted).

Time deposits, which had fallen during August, stabilized in September. This dynamic was influenced by the behavior of Mutual Funds (FCIs), especially money market FCIs, which reversed the fall in equity observed in August. The recovery of deposits by financial service providers and other legal entities offset the decrease in placements by individuals throughout the month.

CRFs also influenced the evolution of current account deposits. As of September 17, the BCRA modified the way it determines the interest rate it pays for the passes it makes with the FCI, which was set at a value equivalent to 0.7 of the rate of 1-day passive passes of financial institutions in the BCRA. In practice, this change meant an increase in the remuneration of the passes for the FCIs and a transfer of funds from deposits in commercial banks to passes in the BCRA. At the end of September, the FCIs maintained a balance of passes of $85 billion. The total amount of interest-bearing current account deposits plus the balance of passes with the BCRA remained relatively stable compared to the previous month.

The BCRA’s Monetary Policy Committee (COPOM) announced new WB targets, which in September and October contemplate growth of 2.5% per month. The targets will be adjusted according to the net foreign exchange operations carried out by the BCRA as of the date of publication of the statement. In the case of September, the adjusted target stood at $1,370.4 billion. The average monthly balance of the Monetary Base (WB) stood at $1.342 billion.

To ensure the contractionary nature of monetary policy, the COPOM increased the lower limit for the interest rate on Liquidity Bills (LELIQ) from 58% to 78%, during the inflationary peak. For October, this limit was set at 68%, consistent with market projections regarding a slowdown in the inflation rate. The LELIQ rate peaked at 86% on Sept. 10 and then gradually declined to 79.2% by the end of the month, 4.1 p.p. below the level at the end of August. Interest rates paid on time deposits in pesos showed greater stability. For example, the BADLAR of private banks stood at 58.9% at the end of September, 0.8 p.p. above the level at the end of August. In turn, the rate paid for deposits of up to $100,000 from individuals ended September at 55.3%, which implied an increase of 1.3 p.p. in the month.

Private sector dollar deposits ended September at a level of US$21,380 million. After reaching falling rates of more than 3% daily during the last days of August and the first days of September, the withdrawal of deposits in dollars was reduced to daily values close to 0.4% of the stock by the end of the month under analysis. Financial institutions attended to the withdrawal of deposits in dollars mainly with balances in current accounts that they maintained at the BCRA and with the collection of part of the loans in dollars. Bank liquidity in dollars remained at high levels, averaging 50.6% of deposits in this currency, with a higher proportion of cash than in previous months.

In September, loans in pesos to the private sector accelerated their pace of expansion, presenting a monthly increase of 2.4% in nominal and seasonally adjusted terms. The lines mainly aimed at companies were the ones that grew the most. The nominal and seasonally adjusted balance of advances registered an increase of 10.5% in the month, while that of documents grew 6%. In the latter case, in a context of a fall in single-signature documents in dollars, due to the fact that certain companies chose to refinance their debt in foreign currency, taking credit in pesos.