Last March, the Central Bank (BCRA) validated a expansion of the Monetary Base of more than $1.92 trillion. Of that total, $622 billion corresponded to an increase in the public’s holdings of bills and coins, plus $218,000 million from the banks, and the rest to an increase in the bank reserves for more than $1 billion. This way The Base escalated to almost $12.5 billion.
Even so, the process of demonetization of the economy with the sustained fall of monetary aggregates in real terms to historical lows (both M2 and M3 are at minimum levels in the last 20 years, around approximately 6% and 9% of GDP).
From the analysis of the March data it is clear that Base continues to fall in real terms as a result of the absorption of pesos by the Treasury via the repurchase of securities held by the BCRA, plus the purchase of foreign currency for approximately $800,000 million to meet the July maturities of the Bonares and Globales. Added to this is the policy of sterilizing the monetary surpluses of the BCRA, which aspires to practically all of the pesos injected for the payment of interest on passive repos.
When it comes to discerning the main expansion factors of the Base, the monetization of the trade surplus, despite the fact that the high season for harvest settlements has not yet begun (in addition, 20% of the settlement is diverted to the CCL dollar market), which is largely explained by the unavoidable drop in imports linked to the recession and with the import payment schedule.
The other factor was the Others account because the lower demand for bonds for importers (Bopreal) was insufficient to avoid a net injection of pesos through this channel associated with the BCRA’s open market operations.
Thus, on the one hand, the net purchase of foreign currency from the private sector injected almost $2.5 trillion, net sales to the Treasury absorbed more than $401 billion. On the other hand, the Treasury increased its deposits in the BCRA by almost $259,000 million.
The financial sector was expansive through interest payments of almost $1.98 trillion and contractive via the placement of Passes at $2.75 billion (In March the last Leliqs were canceled for $3,000 million).
Stock of remunerated monetary liabilities, below 8% of GDP
Regarding the stock of remunerated monetary liabilities, in terms of GDP, it fell below 8% due to the strong liquefaction process due to the fall in the real interest rate. Which, obviously, was also reflected in the liquefaction of peso deposits in the private sector and in the contraction of the M3 aggregate. It is worth noting that the liquefaction was such that it offset the placement of Bopreal dollar securities and the BCRA’s operations with Treasury securities.
What can be expected from now on?
LCG analysts point out that under a context of exchange restrictions, the savings liquefaction strategy in pesos with low rates and the inflation data for March is known, which Minister Caputo anticipated at 10% monthly, a further reduction is expected.
“It will be seen in the future if this strategy is the way to lift the stocks after having liquefied the stock of assets in pesos in order to reduce the amount of potential pesos to buy dollars and give more back to the BCRA to raise rates in the future. Or, dollarize the economy by improving the exchange ratio due to the expected increase in reserves and the decrease in stock in pesos,” Those from LCG maintain that they continue to lean towards the first option although they believe that promoting disdain for the peso with lower rates will have negative results in the longer term.
Source: Ambito
