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Thursday 24th of December 2009
April 20, 2009    

Central bank of Jordan cuts interest rates

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by Peter Charalambous

Over the weekend Jordan’s central bank announced that it will cut the benchmark lending rates by 0.5 percent in order to increase liquidity and make sure that the availability of cheap credit will help the country avoid the downward spiral of the global financial turmoil.

The rate will fall to 5.25 percent with the overnight lending rates down to 3 percent.

Due to the deepening recession that is being suffered by the world economy, Umaya Toukan the governor of the Central Bank of Jordan, has said that the compulsory reserve requirement on private banks will be cut from 8 percent to 7 percent.

The inflation rate has fallen in the first quarter of 2009 to just 2.8 percent compared to 9.9 percent last year, while economic growth has fallen from 5.4 percent in 2007 to 4 percent in 2008.

Jordan has suffered badly in the global financial crisis and is one of the worst hit in the Gulf, particularly with the fall in oil prices.

This is the third consecutive interest rate cut since November 2008 in a bid to protect economic growth from the impact of the global recession.

In order to kick start growth, Toukan said that the banks in the Kingdom needed to operate in a more transparent and relaxed way so that lending standards are lowered and that the focus is then placed firmly on increasing investment.

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