‘First interest rate reduction in decade bodes well for economy’

AMMAN — The Central Bank of Jordan's (CBJ) decision to lower the interest rates on all monetary policy instruments, effective as of today, holds the potential to improve investments and consumption in the Kingdom as well as address lower growth rates in the country, according to experts.

The CBJ's decision to lower the interest rate was the first to be made in almost a decade, and could “bring relief to the markets and economic sectors in Jordan following years of interest rate hikes”, economist Mazen Irsheid told The Jordan Times on Saturday.

A similar measure is expected by local commercial banks, according to Irsheid, who hopes it would be taken no later than the beginning of September. 

"Lowering interest rates might also increase the growth of credit facilities for different economic sectors, which can improve the investments and consumption," economist and investment consultant Wajdi Makhamreh said in an interview with The Jordan Times on Saturday.

"Given that we are facing lower growth rates, I believe lowering interest rates will affect the growth rate positivelty in the coming few months," Makhamreh added.

The CBJ's decision on Thursday was expected after the US Federal Reserve took a similar measure hours earlier, according to Irsheid, who added that since the Jordanian dinar was pegged to the US dollar in the mid 90's, it has been customary for the CBJ to follow the interest rate movements on the dollar in order to maintain the attractiveness and balance of the dinar. 

Due and to low inflation rates, international and regional trends and with the Treasury holding a healthy amount of foreign reserve, Makhamemreh said that lowering the interest rates went smoothly.

For his part, political economy consultant Zayyan Zawaneh said that “locally, the CBJ’s last decision is good, but, alone, it does very little to incentivise the Jordanian economy”.

Zawaneh pointed out that the CBJ is still following the interest rate on the US dollar “despite very different economic conditions and dynamics”.