Monetary policy is controlled by the Central Bank of Jordan, which has played a key role in promoting balanced and sustainable economic growth in the Kingdom. In 1996, monetary policy facilitated fiscal stability, with a greater focus on increasing the foreign currency reserves of the Central Bank to enhance the stability of the exchange rate of the Dinar, one of the main requirements of balanced and sustainable economic growth.

To achieve monetary stability, the Central Bank continued its intervention in the money market through use of the indirect monetary control approach as a seller or buyer of three and six-month certificates of deposit (CDs) denominated in the Jordanian Dinar. Consequently, the outstanding balance of CDs in 1997 increased by JD 438 million, increasing the total balance of CDs by 71% to JD 1055.6 million. Interest on these CDs decreased slightly in 1997: the highest rate on three-month CDs was 6.25% and the highest rate on six-month CDs was 6.5%, compared to 9.25% and 9.5%, respectively, in the previous year.

Accordingly, monetary expansion slowed in 1996 to 0.3% and grew to 7.8% in 1997. Credit extended to the private sector grew by JD 176.1 million in 1997 over its 1996 level. This was due to a decline of JD 111.2 million in net credit extended to the government by the banking sector. The decline in net credit extended to the government would have fallen to JD 115.6 million if net government borrowing from the International Monetary Fund (IMF) had been taken into consideration. As a result, the increase in the net foreign assets of the banking system contributed 8.1% to the growth of domestic liquidity in 1997, while net domestic assets had a contractionary effect of -3%.

Monetary policy was successful in achieving its goals because of aggregate monetary measures taken during 1996. Inflationary pressures were contained, particularly those which arose from the aggregate demand side of the national economy. The stability of the Dinar's exchange rate relative to most major foreign currencies was maintained, to a great extent because of the exchange rate policy adopted by the Central Bank toward the end of October 1995, which gave priority to stabilizing the exchange rate of the Dinar relative to the US Dollar, while allowing the former to fluctuate slightly relative to other currencies.