The Central Bank of Egypt (CBE) withdrew, in an open market tender last week, liquidity worth LE1.082 trillion from local banks at 27.75 per cent interest rate.
In May, the CBE withdrew liquidity worth LE3.7 trillion from local banks at 27.75 per cent interest rate in five open market tenders.
The move is part of CBE’s role in managing banks’ excess liquidity for enhancing the impact of monetary policy. The fourth and fifth tenders amounted to LE1.05 trillion and LE872.550 billion, according to CBE data.
The first three bids totaled LE460.8 billion, LE667.25 billion and LE655.6 billion, respectively, in May.
The CBE is seeking best international practices well manage the banking sector’s excess liquidity in a bid to improve effectiveness of its monetary policy decisions.
Domestic liquidity rose to LE10.35 trillion in May 2024, up from LE8.87 trillion in December 2023, according to CBE data.
Domestic liquidity has been rising over the past months. It increased from LE8.87 trillion in December 2023 to LE8.98 trillion in January 2024, then to LE9.12 trillion in February. It rose to LE9.98 trillion in March and to LE10.09 trillion in April, according to CBE data.
The country’s M2 money supply jumped by 27.1 per cent to LE 10.35 trillion in May, according to CBE data. From an economic perspective, higher levels of money supply indicate higher inflation rates.
Urban inflation fell to 28.1 per cent in May, down from 32.5 per cent a month earlier, according to data from the state-run Central Agency for Public Mobiliation and Statistics (CAPMAS).
Gold jumps 12% on high demand
Gold has performed remarkably well in 2024, rising by 12 per cent, outpacing most major asset classes, the World Gold Council (WGC) said in a report.
The precious metal has thus far benefitted from continued central bank buying, Asian investment flows, resilient consumer demand, and a steady drumbeat of geopolitical uncertainty.
“As we look forward, the key question in investors’ minds is whether gold’s momentum can continue or if it’s running out of steam. With a few exceptions, the global economy is showing wavering growth indicators – eager for rate cuts – amid lower but still uncomfortable inflation,” said the WGC report, a copy of which was made available to the Egyptian Mail.
The market’s outlook is not too dissimilar, and gold price today broadly reflects consensus expectations for the second half of the year. However, things rarely go according to plan. The global economy, as well as gold, seem to be waiting for a catalyst.
“For gold, we believe the catalyst could come from falling rates in developed markets, that attract Western investment flows, as well as continued support from global investors looking to hedge bubbling risks amid a complacent equity market and persistent geopolitical tensions,” the report said.
Gold has made headlines this year, breaking record highs multiple times between mid-March and mid-May. At the time of writing, gold is up 12 per cent, and has been trading above $2,300 per ounce (oz) for most of the second quarter.
It has also provided double-digit returns across multiple currencies.
