Experts welcome CBJ decision to lower interest rates

AMMAN — Economists on Thursday welcomed the Central Bank of Jordan’s (CBJ) decision, for the third time this year, to lower interest rates on all monetary policy instruments by 25 basis points, saying it will have a “positive impact” once banks comply.

The decision “coincided with the Federal Reserve System in the US which lowered its interest rate as well, and here we are talking about the accumulation of three-quarters of one percentage point this year,” Economist Husam Ayesh told The Jordan Times over the phone on Thursday. 

He continued: “This could have a positive impact related to lowering interest rates on loans and facilitations, and thus lowering their costs for economic sectors, investors, and even the government.”

The decision is intended to improve the performance of related sectors, which would increase investments and revenues, which Ayesh said are crucial to improve economic performance. 

Although the CBJ made the decision in line with regional and global changes and effects, this time the decision also coincided with the government’s plan to stimulate the economy, and could “support forward progress”, Ayesh said.

The economist noted that banks should respond to the lowering of the interest rate quickly, in order to ensure the decision’s impact on investors and borrowers from the banking sector.

A delay in implementing the lower rates would “hinder” investors and economic sectors from receiving facilitations from banks, Ayesh said.

“This maybe the last time the Federal Reserve System lowers the interest rate this year, but the CBJ could still take the initiative and study lowering the rates once more by a quarter to reach a full percentage point this year, which could significantly impact the costs borne by economic sectors and investors, increasing growth as well,” he concluded. 

The CBJ attributed the decision to the positive indicators such as national exports, tourism income and the continued flow of remittances, which have “reflected positively” on foreign currency reserves. 

The decision was also made in light of low inflation rates, in addition to growth in deposits and credit facilities in the private sector, the CBJ said.

Economist Wajdi Makhamreh said that the CBJ has “good reserves”, the economy is improving and lowering interest rates will benefit loan costs, in addition to encouraging increased funding in investment projects, or new funding to expand existing projects. 

Makhamreh said that this will also vitalise the real estate and housing sector, in line with the government’s recently announced plan to stimulate the economy. 

When the banks implement the decision, it might lower interest rates on deposits, and people might move their finances to another sector, such as the stock market or the real estate sector, which Makhamreh said could be one of the reasons why banks bide their time in lowering interest rates.