Jordan central bank aggressively raises key interest rates by 50 bps in an attempt to rein in surging inflation

 

Jordan central bank aggressively raises key interest rates by 50 bps in an attempt to rein in surging inflation. The Central Bank of Jordan took aggressive action to combat rising price pressures by raising its key interest rates for the third time already this year. At an unscheduled monetary policy committee meeting, the bank decided to increase its lending rate by 0.5 percentage points to 4.25%, while also hiking its savings rate for banks by 0.5 points to 3.25%. This follows two previous rate hikes already in 2022, underscoring the urgent challenge of taming inflation that hit a new record high of 9.8% year-over-year in May according to official statistics. Central bank officials acknowledged inflationary threats to the economy from high global commodity prices and supply chain issues stemming from the Russia-Ukraine conflict. If inflation becomes entrenched, it poses risks to broader macroeconomic stability and Jordan's ability to spur sustainable growth. By making credit more expensive, the rate hikes aim to cool domestic demand and the pace of economic activity to ease inflationary pressures. However, critics note that higher rates could also slow the post-pandemic recovery and impact businesses still struggling with the fallout of COVID-19. The bank will be hoping the latest monetary policy tightening is sufficient to guide inflation steadily lower in the coming months so further rate increases may not be needed. But much will depend on uncertain geopolitical factors and global commodity markets outside of Jordan's control.