Report: Inflation Decline Boosts Interest Rate Cut Expectations in Jordan by 2027

The report noted that the rise in inflation in Jordan during 2026 is mainly due to rising food prices, which account for about 27% of the consumer price index basket, along with pressures resulting from import route disruptions.

It explained that poor crop yields in late 2025 will keep food price inflation high during the second half of 2026, in conjunction with the continued effects of navigation disruptions through the Strait of Hormuz, which adds pressure on the supply side and import costs.

In contrast, the report expects these pressures to ease during 2027 with improved geopolitical conditions and the resumption of trade movement through the Strait of Hormuz, which will support the decline in inflation in Jordan to 2.2%.

The Department of Statistics issued its monthly report on the general consumer price index for August 2026, where the inflation rate for the first eight months of the current year was 2.20% compared to the same period in 2025, reflecting that inflation levels remain within moderate ranges during the current year.

Interest Rate Cut Next Year

Regarding monetary policy, the report indicates that easing monetary policy in Jordan will be linked to the path of the Federal Reserve, with expectations of a 50 basis point cut in US interest rates during 2027, providing room for more accommodative monetary conditions in the region next year.

The Open Market Operations Committee of the Central Bank of Jordan decided, in its sixth meeting of 2026, to raise interest rates on all monetary policy instruments by 25 basis points, effective Monday, September 21, 2026.

In contrast, the Jordanian Banks Association announced on Sunday that banks operating in the Kingdom will not reflect the increase resulting from the Central Bank of Jordan's decision to raise interest rates on monetary policy instruments by 25 basis points on the interest rates of existing loans granted to individuals, leaving their monthly installments without an increase due to this hike, thereby avoiding additional financial burdens on borrowers and supporting their ability to meet their obligations.

The association explained that this step comes despite the rising cost of funds for banks, including rising interest rates on deposits, especially in foreign currencies, following the US Federal Reserve's decision to raise interest rates by 25 basis points.