BUENOS AIRES (Dow Jones)–Argentina’s monetary supply expanded 39.4% on the year in August in nominal terms as the Central Bank continued to stoke growth through loose monetary policy despite rampant inflation.
In real terms, the monetary base was up 27.1% on the year, while the nominal gain on the month was 1.6%, the Central Bank said in its monthly report Tuesday.
The Central Bank’s target for M2 expansion this year in real terms is 27.9%, following a 28.1% increase in 2010.
Peso-denominated loans to the private sector continue to be the principal growth motor for the monetary aggregate, the Central Bank said. These loans made up over half of the growth in the monetary supply so far this year, growing 3.2% on the month to ARS6.5 billion ($1.5 billion) in August, the Central Bank said. Commercial loans in August were up 54.8% on the year. However, consumers continued to pay a hefty average interest rate of 29.9% per year.
Meanwhile, the Central Bank’s international reserves fell by $2 billion during August, mainly due to a $2.2 billion payment on the Boden 2012 bonds.
While the bank’s loose monetary policy has fueled rapid growth–expected to top 8% this year after a 2010 GDP expansion of over 9%–it has caused prices to soar.
Most economists say annual inflation is running between 20% and 25% due to high government spending, the lax monetary policy and a booming economy.
Source: online.wsj.com