Jordan interest rate cut aims to prop up sinking stocks

Business Materials 25 November 2008 02:29 (UTC +04:00)

The Central Bank of Jordan on Monday cut the basic interest rate by 0.5 percentage points, to 6.25 per cent, in what analysts considered a late attempt to boost stocks at the Amman Stock Exchange, dpa reported.

In a parallel move, CBJ Governor Umayya Touqan said that the banks' compulsory cash ratio had been trimmed to 9 per cent from 10 per cent.

"The measures were taken in view of the declining inflation rate, which fell 2 percentage points at the end of October from a month earlier, as well as expectations of further falls in future," Touqan said.

The decision apparently came in response to criticism that the CBJ's failure to respond to interest rate cuts by the US Federal Reserve and regional central banks had aggravated the situation on the Jordanian stock exchange. Jordanian stocks have lost about 20 per cent of their value over the past 10 days.

The CBJ step came one day after the Saudi Arabian Monetary Authority (SAMA), the equivalent of a central bank, cut the repo rate by 1 per cent, to 3 per cent.

The decision pushed up Saudi stocks on Monday by 6.21 per cent, enabling the market to recover some of the heavy losses it incurred over the past two weeks due to falling oil prices and global deflation fears.

Kuwaiti stocks extended losses on Monday with the all-share price index shedding 1.9 per cent.

Egypt's CASE 30 Index, which measures the performance of the market's 30 most active stocks, slid 5.63 per cent on Monday on what analysts called renewed selling pressures by foreign investors.