The inevitable consequence of the sudden increase in interest rates, effective from the end of July, Private sector credit declines for second straight month in August, down 2.4% compared to July, This is the most obvious decline of the year, but not surprisingly, data released yesterday by the Central Bank in its monthly monetary report is in line with the new outlook for monetary policy and the cooling it means for the economy.
In this sense, the decline in consumer financing was deeper, which is The first confirmation of the break that the advisors who do the measurement themselves warn in advance, In this segment, made up of personal loans and, essentially, credit card financing, the reduction in actual terms was 2.7% and 3.1%, respectively.
“As such, the average balance for the month will be 8% lower than the year-ago level. Meanwhile, personal loans would have displayed a monthly decline of 2.7% at constant prices and 7.9% below the August 2021″ level, The BCRA details the report that clarifies that the interest rate corresponding to personal loans averaged 74.6% per annum in nominal terms in August (equivalent to an effective annual rate of 106.3%), which shows 9 points increase from last month, The main reason for the return can be found in this growth, which will have consequences in terms of activity.
“Restrictions on imports due to dollar crunch, rate hikes, low public spending, The whole focus of economic policy is now contractionary, so we expect a recession that is probably already happening”, said Miguel Kiguel, director of the consulting firm Econviews.
Official data break on declining consumer funding is the first confirmation that advisors who measure themselves already warn
The increase in the cost of credit affected not only consumer credit. Production credit and commercial lines also saw a decline, including promotional financing lines for producer investment (LFIP), at subsidized rates, which rose in pesos below inflation. In this regard, the BCRA states that “It is to be noted that, in line with the increase in the reference interest rates, the maximum rate of the line to finance working capital was raised from 58% to 69% per annum nominal; and That the investment grew from 50% to 59% of the nominal annually in line with the projects.
Due to circumstances, the Central Bank revised its policy of gradual adjustment of the monetary rate at the end of July and, amid the exchange rate move following the departure of former Economy Minister Martin Guzmán, and his fleeting successor amid difficulties, sylvina batakisoTo stabilize expectations, the head of the monetary authority; Miguel Pesce, implemented an increase of 800 basis points at the end of July. This increase, over those implemented so far, was complemented by an even greater jump in mid-August, with Sergio Massa already at the head of the Palacio de Hacienda. On that occasion, the increase was 950 basis points, leaving it at the current level of 69.5% annualized nominal.
Credit to production and commercial lines saw a decline, including promoted financing lines for producer investment (LFIP), at subsidized rates, which rose in pesos below inflation.
Although the effect on financing for the economy was immediate, Consistent growth still looks inadequate in light of inflation rates that do not yield, hence, Once the inflation rate is known, the Central Bank is preparing for a new rate adjustment next Thursday., It is expected that the magnitude of the adjustment will be very small on this occasion, but it will prove to be a milestone for all of them. is that only a modest increase of 200 basis points (at least between 300 and 500 bp) would push the annual nominal rate to 71.5%, indicating An effective rate above 100% per year.
In this sense, the Central Bank’s report clearly explained that the institution now “accelerated the rate of increase in the interest rate of its monetary regulation instruments as well as raised the minimum interest rates of fixed deposits. Thus, Strives to promote positive returns in real terms on savings instruments in the peso and maintain monetary and exchange stability,