AMMAN: The Central Bank of Jordan yesterday cut basic interest rates by half percentage points in the third such move since the advent of the global financial crisis in September.
The CBJ trimmed the rediscount rate to 5.25 percent from 5.75 percent and the repurchase rate (repo) to 5.00 percent from 5.50 percent.
In an attempt to ease credit squeeze, the CBJ also cut the compulsory reserves deposited with the central bank by commercial banks by 1 percentage point to 7 percent from 8 percent. The step, which has been prompted by the declining inflation rate, has the aim of spurring the country’s growth, the CBJ Gov. Umayya Touqan said. “The measures has been taken in the light of the deepening world recession and the receding inflationary pressures on the national and regional economies,” Touqan added.
Jordan’s growth rate retreated to 4 percent in the fourth quarter of 2008 from 5.4 percent in the same period of 2007. The country’s growth rate also dropped to 2.8 percent in the first quarter of 2009 compared with 6.9 percent in the same period of 2008, the CBJ said.
Bankers say Jordan is among the countries worst hit in the Middle East from the fallout of the global financial crisis with a forecast drop in remittances and foreign investments by Gulf Arab investors hit by turbulence in Western markets and a sharp drop in oil revenues.
The bank has traditionally maintained a high interest rate policy to preserve the attractiveness of dinar-denominated assets and to hamper any excessive outflow of dinars into dollar denominated assets. It usually ensures a differential between the dinar and the dollar of around at least four percent to stem capital flight.
— With input from agencies