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Why did the Central Bank of Egypt withdraw 100 billion pounds from banks’ reserves?

The economics lecturer at the American University in Cairo, Hani Geneina, explained the scenes of the central bank’s decision and pointed out that there is a so-called interest rate set by the central bank on lending and borrowing by banks from each other in the so . -called interbank process, and the interest rate on these operations must be fixed at a specific number.

He added, in statements to “Sky News Arabia”, that if the excess liquidity in banks exceeds the normal limit, the interest on the interbank will fall, increasing the inflation rate in the country due to the increase in the supply of cash .

He explained that, for this reason, the Central Bank periodically submits a weekly bid to withdraw an amount of liquidity offered by the banks and invest it for them as deposits with it at an interest rate it intends to maintain, which the issue of inflation in the market.

Geneina pointed out that the exciting thing this week is that the Central Bank of Egypt in its weekly bid requested 100 billion pounds, but the banks offered more than 400 billion pounds, and this is a very large offer and more than the normal rate, as every time the central bank asked for example 100 billion pounds, so the supply of banks does not exceed 110 billion pounds.

He went on to say that the increase in the supply of banks is above the normal rate, which this time gave rise to speculation that there was something, such as the banks, for example, retaining that liquidity in anticipation of the central bank’s decision on Thursday. , which is expected to increase interest on lending and borrowing in the pound, and then the banks benefit from the excess liquidity It has, or the reason for the increase in the surplus is that the Central Bank bought dollars from banks and great liquidity injected into the Egyptian pound in the market.

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