Jordan's central bank lowered its benchmark re-discount rate by 25 basis points to 4.75 percent, along with its other policy rates, due to improving economic fundamentals "and a boost in the demand for Jordanian dinar denominated assets."
The Central Bank of Jordan (CBJ), which last changed its benchmark rate in February 2012 when it raised it by 50 basis points to curb inflation, said the aim of the rate cut was to "promote the expansion of private credit and growth-led investments."
With effect from today, the CBJ said the rate on its overnight repurchase agreements would be 4.50 percent, the rate on the weekly repurchase agreement 4.0 percent and the rate on the overnight deposit window facility 3.75 percent.
The rate on the overnight window deposit was raised in December last year by 75 basis points to improve the attractiveness of dinar-denominated assets and national savings. The CBJ said then that it was retaining the rates on other instruments to make sure the banking system would provide sufficient financing for economic activities and thus spur economic growth.
"The CBJ continues to monitor economic and financial developments locally and internationally, and stands ready to act proactively to sustain monetary stability, and to promote an attractive investment environment," the bank said.
Unlike many emerging and frontier market currencies, the Jordanian dinar has been relatively stable in recent months and has risen only slightly since the beginning of the year. It was trading at 0.708 to the U.S. dollar today, up from 0.709 in early January.
Jordan's Gross Domestic Product expanded by an annual 2.6 percent in the first quarter form 2.2 percent in the fourth quarter while the unemployment rate eased to 12.6 percent in the second quarter from 12.8 percent in the first quarter.
The inflation rate rose to 7.1 percent in May from 6.01 percent in April.