Central Bank of Jordan: Monetary Policy Framework and Interest Rate Adjustments

Central Bank of Jordan

Monetary Policy Framework

The Central Bank of Jordan (CBJ) has announced adjustments to its monetary policy framework, specifically targeting the Overnight Rate and the Corridor System for liquidity management.

1. Overnight Rate (Targeted Rate): The CBJ has set the target overnight rate at 4.75%. This rate serves as the primary benchmark for monetary policy implementation.

2. Corridor System: To manage liquidity and stabilize short-term interest rates, the CBJ has established a corridor system. The upper bound of the corridor is set at 5.25% (Standing Facilities - Lending Rate), and the lower bound is set at 4.25% (Standing Facilities - Deposit Rate). Banks can borrow from the CBJ at the upper bound or deposit funds at the lower bound, ensuring that the overnight market rate remains within this range.

3. Inter-bank Market: The inter-bank market operates within this corridor. Banks are encouraged to manage their liquidity positions through inter-bank transactions, with the CBJ providing standing facilities as a backstop.

4. Standing Facilities: The CBJ offers standing facilities to banks at its discretion. The lending facility rate is 5.25%, and the deposit facility rate is 4.25%. These facilities are available to all banks to help manage daily liquidity fluctuations.

5. Repurchase Agreements (Repo): The CBJ may conduct open market operations, including repurchase agreements, to inject or absorb liquidity as needed. These operations are conducted at the CBJ's discretion to align with monetary policy objectives.

6. Effective Date: These adjustments are effective immediately. All banks operating in Jordan are required to adhere to the new rates and operational guidelines.

For further information, please contact the Central Bank of Jordan.

Email: info@cbj.gov.jo

Central Bank of Jordan Monetary Policy Department