Jordan holds key rate, cuts deposit, weekly repo rates

    Jordan's central bank maintained its benchmark rediscount rate at 4.25 percent, but cut the rate on its overnight deposit window and the rate on weekly repurchase agreements to "promote investments, economic growth and job creation through the provision of credit at lower cost."
    The Central Bank of Jordan (CBJ), which last cut its rediscount rate by 25 basis points in January after cuts of 50 points in 2013, reduced the rate on its overnight deposit facility by 50 basis points to 2.75 percent and the rate on weekly/other repurchase agreements by 50 points to 3.0 percent.
    The rate on the CBJ's overnight repo was unchanged at 4.0 percent.
    The rate cut was prompted by recent positive developments in the economy, an acceptable level of inflation, an increase in the attractiveness of dinar-denominated assets as well as a significant improvement in the current account, reflecting robust economic growth and a comfortable level of foreign exchange reserves, the CBJ said.
    The bank added that it was "ready to act proactively to ensure monetary stability and promote an attractive investment climate."  

    Despite the pressure on Jordan's economy from the cost of accommodating hundreds of thousands of Syrian refugees, the economy is gaining strength, with growth recovering from a trough of 2.3 percent in 2010 to 3.3 percent in 2013.
    In April the International Monetary Fund said it expects growth to strengthen further, with the economy expanding by 3.5 percent in 2014 and to 4.5 percent in the medium term.
    Inflation is expected to decline to about 2.5 percent by the end of 2014 and to 2.0 percent in the medium term, while the current account deficit would gradually improve to about 4.5 percent of Gross Domestic Product in the medium term, mainly due to a lower energy import bill though the Syrian conflict and fluctuations in gas imports from Egypt remain major risks.
     Last year Jordan's current account deficit fell to 12.1 percent of GDP from 17.3 percent in 2012.
    Inflation in May rose to 3.7 percent from 3.2 percent the previous month.

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