Why is CBK Pumping Money in to Banks

[Omollo]

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As can be seen it spiked last month. What is Opus Dei hiding?:

[Georgesoros]

Its called printing money. I'tll create inflation to a point money becomes worthless.

[hk]

This is what reverse repo mean https://www.centralbank.go.ke/rates/repo-and-reverse-repo/ . The CBK is mopping excess liquidity in banks not pumping money. By reducing money supply the CBK is actually fighting inflation. Its not printing money.

[MOON Ki]

This is what reverse repo mean https://www.centralbank.go.ke/rates/repo-and-reverse-repo/ . The CBK is mopping excess liquidity in banks not pumping money. By reducing money supply the CBK is actually fighting inflation. Its not printing money.

Strictly, what you point to does not actually say what "reverse repo" is. 

The reverse repo rate is the rate at which the banks park surplus funds with reserve banks, while the repo rate is the rate at which the banks borrow from the central bank. It is mostly done when there is surplus liquidity in the market.

The first sentence simply gives two definitions of rates.    What is the "it" that is referred to in the second sentence?

I understand As have been scarce in KCSE examinations.   

[hk]

This is what reverse repo mean https://www.centralbank.go.ke/rates/repo-and-reverse-repo/ . The CBK is mopping excess liquidity in banks not pumping money. By reducing money supply the CBK is actually fighting inflation. Its not printing money.

Strictly, what you point to does not actually say what "reverse repo" is. 

The reverse repo rate is the rate at which the banks park surplus funds with reserve banks, while the repo rate is the rate at which the banks borrow from the central bank. It is mostly done when there is surplus liquidity in the market.

The first sentence simply gives two definitions of rates.    What is the "it" that is referred to in the second sentence?

I understand As have been scarce in KCSE examinations.   

Yes two definitions of two monetary terms  1. Reverse repo rate  2. Repo rate. The it refers to reverse repo rate.
Repo rate is the rate at which banks borrow from CBK. While reverse repo rate is the rate at which CBK buys from banks. So an increase of reverse repo it means CBK is buying alot from banks to reduce liquidity in banks.

[MOON Ki]

Repo rate is the rate at which banks borrow from CBK. While reverse repo rate is the rate at which CBK buys from banks. So an increase of reverse repo it means CBK is buying alot from banks to reduce liquidity in banks.

Yes, I understand all that.   But none of that has anything to do with my point:

(a) Nowhere in what you have "linked to" are we actually told what "reverse repo" actually is.    Information on what happens when some rate goes up or down does not actually define the action that underlies the change in rates.

(b) The whole thing is written in poor English that is reflective of the educational problems in Kenya.     

[Omollo]

  MoonKi, in what context can you possibly mock a person who most likely scored straight As from KCPE to University?

) The whole thing is written in poor English that is reflective of the educational problems in Kenya.     

I read the link and here is what it says Herr. HK;

Whenever the banks have any shortage of funds they can borrow it from the central bank. Repo (Repurchase) rate is the rate at which the central bank lends short-term money to the banks against securities.

It means when banks are fainting they rush to the CBK's HDU (High Dependency Unit) for an urgent blood transfusion.

I got a simpler explanation here: http://positivemoney.org/how-money-works/advanced/how-central-banks-create-money/ which however strengthened my suspicions or if you like, the assertion of money printing below.

[hk]

MoonKi, in what context can you possibly mock a person who most likely scored straight As from KCPE to University?

) The whole thing is written in poor English that is reflective of the educational problems in Kenya.     

I read the link and here is what it says Herr. HK;

Whenever the banks have any shortage of funds they can borrow it from the central bank. Repo (Repurchase) rate is the rate at which the central bank lends short-term money to the banks against securities.

It means when banks are fainting they rush to the CBK's HDU (High Dependency Unit) for an urgent blood transfusion.

I got a simpler explanation here: http://positivemoney.org/how-money-works/advanced/how-central-banks-create-money/ which however strengthened my suspicions or if you like, the assertion of money printing below.

It means when banks are fainting they rush to the CBK's HDU (High Dependency Unit) for an urgent blood transfusion.
That's correct repo volume increase would mean the CBK is lending to banks . But the graph you posted show increase in REVERSE repo meaning more banks are lending or "parking" their money in CBK. So in a nutshell CBK isn't printing money or increasing liquidity its reducing liquidity most likely to contain inflation.

[RV Pundit]

Thanks HK. Now I understand repo & reverse repo. Omollo will latch onto the next propaganda while Moonki will split hairs as usual - don't pay too much attention.

[patel]

Thanks Omollo for this gem. Every day RV Pundit is slowly being exposed for a fraud that he is.....the story is on business daily. 

[RV Pundit]

I wish you could hasten the exposure.

Thanks Omollo for this gem. Every day RV Pundit is slowly being exposed for a fraud that he is.....the story is on business daily. 

[Omollo]

This must be the story Patel refers to:

By CHARLES MWANIKI, cmwaniki@ke.nationmedia.com

Posted  Monday, January 16   2017 at  18:40
IN SUMMARY

• CBK reported in its latest weekly bulletin it drew out of the market Sh68.5 billion while injections stood at Sh53.2 billion.
• The liquidity withdrawal was mainly through the transfer of taxes held by commercial banks, at Sh32 billion, and maturities of reverse repurchase orders (repos) worth Sh13.8 billion.
• The tight market is expected to persist through this week, especially on tax remittances.
• Liquidity in the money markets further tightened last week as Central Bank of Kenya (CBK) mopped up a net of Sh15.3 billion to offer crucial support to the shilling against the US dollar.

CBK reported in its latest weekly bulletin it drew out of the market Sh68.5 billion while injections stood at Sh53.2 billion.

The liquidity withdrawal was mainly through the transfer of taxes held by commercial banks, at Sh32 billion, and maturities of reverse repurchase orders (repos) worth Sh13.8 billion.

Reverse repos involve commercial banks receiving cash from the CBK using their holdings of Treasury bills as collateral, meaning that their maturity results in a cash transfer to CBK.

“The money market was relatively tight during the week, on account of maturing securities under Central Bank of Kenya short term liquidity support to banks (reverse repo maturities),” said CBK in the bulletin.

The average interbank rate — at which banks borrow from each other on emergency basis — currently stands  7.1 per cent, having risen from 4.1 per cent a month ago.

The volumes traded per day have also gone up, rising to Sh115.3 billion last week from Sh80.1 billion the previous week.

The tight market is expected to persist through this week, especially on tax remittances.

“We expect an illiquid environment this week as statutory corporate tax payments are met,” said Genghis Capital analyst Churchill Ogutu.

Indicative of tight liquidity, the cash reserves held by commercial banks at the CBK have fallen in recent weeks. The lenders are required to keep 5.25 per cent of their total customer deposits with the CBK for prudential purposes — to mitigate the risk that comes with all cash being held only in the individual financial institutions.

The CBK bulletin shows that at the end of last week, the lenders held only Sh3.1 billion in excess of the required level, compared to Sh13.1 billion a month ago.

In a market where liquidity is normally skewed in favour of large banks, smaller lenders facing cash shortages have to resort to either the interbank market, the repo market or rediscounting (sell back) their treasuries at a punitive cost.

Last week, the CBK showed that Sh4.9 billion worth of T-bills were rediscounted, the first time investors have done so since July last year.

The tighter market, combined with the CBK dollar sales, has helped the shilling show a slide that has seen it depreciate by 1.4 per cent against the US dollar since the beginning of the year, exchanging at 104 units.