[ad_1]
Central banks have embarked all over the world this year to cut interest rates, a figure that is 26 today. Last week, Russia and Turkey, which had the highest discount rate (4.25%), did it.
Central banks of emerging markets such as Indonesia, the Philippines, Malaysia, India, South Korea, South Africa, Ukraine, Serbia, Paraguay Chile and Iceland have also reduced their interest rates.
Although the European Central Bank kept its rates unchanged last Thursday, it had explicitly indicated the possibility of a reduction in the coming period, and at a more negative rate.
Why are central banks acting now, while inflation and employment are under control?
Many central banks seem to be convinced of the prospect of a recession, as well as concerns about the consequences for the global economy. Central banks are forced to act by reducing interest rates to stimulate economic growth. From the point of view of monetary policy, it is not a better lever for the markets, the economy and the investors.
At the same time, during the statements of the US Federal Reserve and the intervention of US President Donald Trump in the monetary policy of the Council, his demand for rate reduction gave proactive signals and prompted many central banks to take this step.
The current phenomenon can therefore be described as a race to lower interest rates.
The main objective of the interest rate cuts is to encourage investors to borrow to expand their economic activities, which sends a negative message to the business sectors indicating that the company has an interest rate hike. The global economy is threatened with crisis or stagnation, leading to reluctance to borrow even at low rates.
In addition, interest rate cuts can increase the volume of consumer borrowing, which leads to price distortions and bubbles in some sectors as a result of consumer spending resulting from borrowing rather than borrowing. increase in wages or employment.
A future American decision
US Federal Reserve Chairman Jerome Powell recently raised the possibility of lowering interest rates as a result of the global economic downturn, which could affect the US economy, as well as the US economy. inflation, growth and employment related to the US economy.
Trump's unbridled desire to drastically reduce the interest rate and his reluctance to maintain a strong US dollar clearly indicate a reduction at the next Council meeting, with a consensus that he will make the decision July 31st.
The difference and the chances will remain around the reduction: will it be 0.25% or 0.5%? Opinions on these ratios and their effects on the markets are divided.
Central Bank of Jordan
The Central Bank of Jordan generally follows the Fed's decision to change interest rates by linking the Jordanian dinar to the US dollar. Jordan's economic conditions were not favorable to the rise in interest rates when it had been raised by the sensor in previous years, but the binding and fixing of the dinar exchange rate against the dollar have forced the central bank to raise interest rates to maintain its attractiveness.
The reduction of interest rates by the Central Bank of Jordan could offer a favorable opportunity to the national economy and contribute significantly to the improvement of borrowing rates of local commercial banks. In addition, the liberalization and liquidity pumping in most sectors of the Jordanian economy, particularly productive activities, is accompanied by a series of economic measures and government measures that encourage diversified business sectors to invest. and to work with the new evolution of the global interest rate trend.
*financial badyst
Kingdom
Source link
