Compass – Muhammad Saad

The economist, Eng. Amer Al-Shobaki, talked about the US Federal Reserve’s readiness this week to raise the interest rate last.

And as the data showed, US retail sales rose less than expected last June, which reinforced expectations that the Federal Reserve will stop raising interest rates after a widely expected increase of 25 basis points at its July 25-26 meeting.

Al-Shoubaki expected that the US Federal Reserve would start reducing interest rates next year, to be followed by the banks of the Arab Gulf and Jordan.

And the Open Market Operations Committee of the Central Bank of Jordan decided last month to keep the interest rates of monetary policy tools at their level without change.

Interest rate hikes by the Federal Reserve strengthened the dollar, making dollar-denominated commodities more expensive for holders of other currencies and putting pressure on prices.

Oil prices rose, and Brent crude exceeded $80 a barrel, supported by data that raised expectations about interest rates. In a televised interview, Shobaki indicated factors attracting oil prices and that China had the greatest influence.

Higher interest rates could slow economic growth and lower demand for oil.

The Central Bank of Jordan has raised interest rates 10 times since the beginning of the year 2022, to “contain inflationary pressures,” at a time when the bank fixed “interest rates on its financing programs directed at supporting vital economic sectors and small and medium enterprises, with the aim of continuing to support economic recovery.”

Negative effects of raising interest on Jordan

Economists warned during a seminar at the Middle East Media and Political Studies Institute (MEMPSI) against continuing to raise the interest rate, which would frustrate economic growth.

In the symposium on “raising interest rates on the Jordanian dinar, what it has and what it owes,” they agreed that inflation in Jordan is imported from abroad, given the Jordanian market’s dependence on foreign imports of commodities and merchandise, whose global prices have increased significantly.

Former Deputy Prime Minister Youssef Mansour and former Director General of the Association of Jordanian Banks, Adly Qandah, participated in the symposium, and it was moderated by Fayek Hijazin, former Director General of Jordan News Agency.

Participants in the symposium said that raising interest is one of the tools to curb economic inflation, but it is not the main tool, especially since the scene in Jordan differs from the United States of America, which is witnessing a clear decline in unemployment rates and high inflation due to the large sums of money that the US government pumped into the market during the Corona pandemic, while the Jordanian economy is witnessing a slowdown in economic growth, an increase in unemployment rates, and an increase in inflation due to its link to imports.

The attendees unanimously agreed that Jordan’s economy cannot continue to raise interest rates. They pointed out that raising interest rates harmed borrowers because the bank installments that are paid go to amortize the interest without paying out the principal amount borrowed.

They emphasized that raising interest by 9 times during the last period served the owners of the money and harmed the borrowers.

They pointed out that the housing sector was affected by the increase in interest rates. Because “renting an apartment will be cheaper than buying it in light of the increases imposed on borrowers without taking into account the social protection of borrowers.”