But when analyzing the behavior of broader monetary aggregates such as M2 (currency plus demand deposits) and M3 (currency plus total deposits) the numbers say the opposite, in August monetary expansion was accelerated. Let’s see.
The Base increased by $229,000 million as a result of expansion through interest payments from the BCRA of $1.61 trillion, in addition to BCRA interventions in the exchange and bond markets of $908,000 million and for net purchases of foreign currency from private sector for $514,000 million (product of operations linked to the “agro dollar” Export Increase Program and the adjustment of the official exchange rate).
How all this expansion of the Base is absorbed, mainly, through the placement of Passive Passes (BCRA bank placements with a one-day term) and Liquidity Bills and Notes (Leliq and Notaliq). Through Passes, BCRA sought $885,000 million and another $1.41 billion through Leliq and Notaliq. In other words, with these two monetary regulation instruments, the BCRA has contracted to expand the Base by 75%.
The rest corresponds to the Public Sector, which in August contracted almost $515,000 million. This was explained because the Treasury canceled $500,000 million Transitory Advances (ATN) from BCRA, also bought foreign currency from BCRA equivalent to $78,000 million and increased BCRA deposits by $187,000 million. All of this is partially offset by the Transfer of Profits to the Treasury of $250,000 million.
Regarding the composition of paid debts (Pases and Leliq), in August the 28-day Leliq represented, on average, 68.2% of the total, reducing their relative participation compared to the previous month. Longer-term species, concentrated through Notaliq, represented only 0.7% of the August balance.
On the other hand, 1-day passive repos increased their participation in the total instrument, reaching a representation of 26.4%. The rest consisted of Lediv and Legar, who increased their participation by 1 point compared to last month.
The numbers show that while the Base is growing at an annual rate of 50%, well below inflation (according to data from BCRA the Base fell 6.2% in real terms in August and accumulated a decrease of 33% in real terms in the last twelve months), the monetary aggregates go to a three-digit speed, “because the demand for the currency fell and also because the BCRA lowered the reserves,” explained the consulting firm MacroView.
In this regard, it is enough to point out that the Base/GDP ratio will be 3.6% according to the BCRA, around the lowest values since the exit of the conversion. For example, the Broda Study estimates that while the Base grew at an almost 82% annualized rate in August, public banknotes grew by less than 80% while demand deposits grew by 231%, fixed terms by 152%.
Therefore, the private M2 aggregate grew by 184% annualized rate and the private M3 by 178%, while the total M3 by 158%. A fact confirmed by the BCRA itself, led by Miguel Pesce: the expansion of the Base through the “Other” channel for $908,000 million, where BCRA’s interventions in the markets are considered, last month was contaminated by ” execution of contracts. “to place options on National Government securities through financial entities” which explains most of the expansion, others are the operations of public securities in the secondary market.
To date, the accumulated balance in the first eight months of 2023 shows an expansion of the Base of $1.42 trillion. The main expansion factors were interest payments of $7.66 billion, BCRA market interventions for $2.19 billion and Treasury assistance for $1.7 billion.
In any case, until August, the Public Sector left an almost neutral balance because it bought foreign currency from the BCRA to the equivalent of $1.61 trillion net. Meanwhile the net purchase of foreign currency from the private sector left a significant impact of only $230 billion.
On the other hand, the biggest contractionary factors were the placement of Leliq and Notaliq at $5.51 billion and Passive Passes at $3.26 billion. In this way, the stock of paid debt increased to $19.7 trillion. This is equivalent to more than three times the Monetary Base.
