Consumer credit collapsed in August due to rising interest rates

The inevitable consequence of the sharp rise in interest rates, effective from the end of July, Credit to the private sector fell for the second consecutive month in August, down 2.4% from JulyThis is the most obvious decline of the year, but unsurprisingly 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 has been more profound, which The first confirmation of the rupture that the advisers who do the measurement themselves warn in advanceIn this segment, made up of personal loans and, essentially, credit card financing, the decline in real terms was 2.7% and 3.1% respectively.

“Thus, the average balance for the month will be 8% lower than the level of the previous year. Meanwhile, personal loans would have posted a monthly decline of 2.7% at constant prices and 7.9% below the level of August 2021″, The BCRA details the report which specifies that the corresponding interest rate 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 more than last monthThe main reason for the return lies in this growth, which will have consequences in terms of activity.

“Restrictions on imports due to the dollar crisis, rate hikes, weak government spending, All economic policy is now geared towards contraction, so we are expecting a recession which is probably already happening.said Miguel Kiguel, director of consultancy firm Econviews.

The official data break on falling consumer finance is the first confirmation that advisers who are already measuring themselves are warning

The increase in the cost of credit has not only affected consumer credit. Production credits and commercial lines also declined, including promotional financing lines for producers’ investment (LFIP), at subsidized rates, which rose in pesos below inflation. In this respect, the BCRA specifies that “It should be noted that, in parallel with the rise in reference interest rates, the maximum rate of the working capital financing line was raised from 58% to 69% the nominal year; and That the investment has increased from 50% to 59% of the nominal annually depending on the projects.

Due to the circumstances, the Central Bank revised its policy of gradual adjustment of the monetary rate at the end of July and, in the context of the evolution of the exchange rate following the departure of the former Minister of Economy Martin Guzmán, and of his short-lived successor in the midst of difficulties, sylvina batakisoTo stabilize expectations, the head of the monetary authority; Miguel Pesce, increased by 800 basis points at the end of July. This increase, compared to those implemented so far, was complemented by an even bigger jump in mid-August, with Sergio Massa already in charge of the Palacio de Hacienda. On this occasion, the increase was 950 basis points, leaving it at the current level of 69.5% annualized nominal.

Production credits and commercial lines declined, including promoted financing lines for producer investment (LFIP), at subsidized rates, which increased in pesos below inflation.

If the effect on the financing of the economy was immediate, Steady growth still seems insufficient given unprofitable inflation ratesTherefore, Once the inflation rate is known, the Central Bank is preparing for a further rate adjustment next Thursday., The magnitude of the adjustment is expected to be very small on this occasion, but this will prove to be a milestone for each of them. is that only a modest hike of 200 basis points (at least between 300 and 500 bps) would push the annual nominal rate to 71.5%, indicating An effective rate greater than 100% per year.

In this sense, the Central Bank’s report clearly explains that the institution “is now accelerating the rate of increase in the interest rate of its monetary regulation instruments as well as increasing the minimum interest rates for term deposits. Thereby, Works to promote positive returns in real terms on peso savings instruments and to maintain monetary and exchange rate stability,

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