CBE withdraws LE100 billion of liquidity for 6th time in a month

CBE withdraws LE100 billion of liquidity for 6th time in a month

Liquidity worth LE100 billion has been withdrawn by the Central Bank of Egypt (CBE) for the sixth time in about a month through open deposits with fixed income auctions, coinciding with the rise in the price of the US dollar on Wednesday afternoon in Egypt, CBE data revealed.

Banking expert Hany Aboul Fotouh said that withdrawing cash from banks through the central bank – in what is known as open market operations – is a common process through which it is possible to withdraw and grant liquidity to banks with a term return.

Fotouh said that it is an essential means of implementing monetary policy, as open market operations aim to supply banks with liquidity and sometimes taking excess liquidity from banks, to manipulate the short-term interest rate and pump basic money into the economy, thus indirectly controlling the total money supply.

In a special statement to Al-Masry Al-Youm, Fotouh explained that withdrawing cash would limit the rise in inflation rates by reducing the money supply and thus limiting the ability of banks to lend. He added that when cash liquidity rises, interest rates on lending fall to the lowest possible percentage.

Limiting lending would control inflation rates, he pointed out.

The Central Bank’s withdrawal