The decision was taken by the central bank’s Supervisory Council following a review of its quarterly monetary policy report.

Governor Gent Sejko said the Albanian economy continued to post positive growth in the second quarter despite a challenging external environment.

Economic activity expanded at a solid pace, although somewhat slower than in the first quarter, while inflation increased due to higher international oil and energy prices and resilient domestic demand, Sejko said. He added that inflation remained under control and close to the central bank’s target.

According to central bank data, average consumer price inflation reached 3% in the second quarter. Economic growth continued to be supported by household consumption, investment, exports, tourism revenues and favourable monetary and financial conditions.

The governor said Albania’s banking sector remained sound, with financial markets characterised by ample liquidity and relatively low borrowing costs. Private-sector lending continued to grow strongly, with the loan portfolio expanding by 14% year-on-year in the second quarter, driven mainly by business investment financing and housing loans to households.

The central bank said the outlook for the Albanian economy remains positive, with growth expected to continue near its potential rate. Inflation is projected to remain slightly above target in the short term before gradually converging toward the target over the medium term.

However, the Bank of Albania warned that geopolitical tensions in the Middle East continue to pose risks to both the global and domestic economy, maintaining upward pressure on inflation and creating uncertainty for future growth prospects.

In addition to leaving the benchmark rate unchanged at 2.5%, the Supervisory Council also kept the overnight deposit rate at 1.5% and the overnight lending rate at 3.5%.

The central bank said it would continue to closely monitor economic and inflation developments and stands ready to use its monetary policy tools if necessary to preserve price stability.

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Governor Gent Sejko said at a press conference that the Council also kept the overnight deposit rate unchanged at 1.5% and the overnight lending rate at 3.5%.

The Council assessed that the current monetary policy stance remains appropriate, as it supports the baseline economic outlook and provides favourable monetary conditions for bringing inflation back to target.

Sejko said the decision also reflects continued uncertainty over future economic and inflation trends, allowing more time to monitor developments, including international oil prices, while preserving flexibility to respond to adverse shocks if needed.

He added that the central bank’s monetary policy will continue to be guided by the objective of price stability, ensuring that temporary supply shocks do not translate into persistent inflationary pressures.

“The Supervisory Council will closely and continuously monitor the situation and remains ready to respond in a timely, appropriate and forceful manner to any material risk to price stability,” Sejko said.

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Speaking at a press conference after a meeting of the Supervisory Council of the Bank of Albania, Governor Gent Sejko said the decision was made after reviewing recent economic and monetary developments and their expected outlook.

“The Supervisory Council also kept the overnight deposit rate at 1.5% and the overnight lending rate at 3.5%,” Sejko said.

He said Albania’s economy continued to expand, with key indicators of economic, monetary and financial stability remaining solid. Inflation edged up slightly in the third quarter but stayed low and below the bank’s target, Sejko added.

“Financial markets have generally been calm and lending has increased. Our flexible approach, supported by fiscal coordination and exchange rate developments, has ensured a monetary environment that supports credit growth, consumption and investment,” he said.

Sejko said the economy is expected to maintain similar growth trends in the coming period, while inflation is projected to return to central bank’s target in the first half of next year.

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Bank of Albania Governor Gent Sejko said in a press conference that the Council deemed the current monetary policy appropriate to support economic growth while keeping inflation under control.

Sejko highlighted that domestic consumption, investments, and tourism continue to bolster economic expansion.

Based on this assessment, the Council also opted to keep the one-day deposit interest rate unchanged at 1.5%, and the one-day lending interest rate steady at 3.5%.

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The central bank Governor Gent Sejko announced the decision during a press conference on Wednesday, stating that the overnight lending rate has also been cut to 3.50% from 3.75%, while the overnight deposit rate was lowered from 1.75% to 1.50%.

“This Supervisory Council’s decision provides more accommodative monetary conditions to ensure the timely and sustainable return of inflation to target,” Sejko said, reaffirming the central bank’s commitment to price stability and credit growth.

He added that the policy shift aligns with previous communications on maintaining a flexible, data-driven monetary approach, and is consistent with the easing trend pursued by the European Central Bank.

“In an environment of high uncertainty, this strategy ensures the necessary flexibility to respond effectively to any deviation from our baseline projections, safeguarding monetary and financial stability,” Sejko concluded.

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The Governor of the Bank of Albania Gent Sejko said at a press conference on Wednesday that the Supervisory Council also decided to maintain the interest rate for the overnight deposit facility and the interest rate for the overnight lending facility unchanged at 1.75% and 3.75% respectively.

According to Sejko, the current monetary policy is appropriate for the central bank to deliver on its price stability target. Sejko noted that the projections suggest inflation will return to the 3% target level by mid-2026.

In this context, Governor Sejko said that the future monetary policy decisions will be determined by new information, and analyses and assessments of the development of domestic inflationary pressures.

Sejko stated that the Supervisory Council’s decisions will always be in line with the price stability target, consistent with the fiscal policy stance and the domestic exchange rate performance, as well as with potential developments in international markets and our foreign trading partners.

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The governor of the Bank of Albania, Gent Sejko told a press conference that the Supervisory Council also has decided to keep the interest rate on the overnight lending facility unchanged at 3.75 and the overnight deposit facility at 1.75%.

“The Bank’s monetary policy will support further growth of economy,” Sejko said, adding that the Supervisory Council observes that the overall balance of medium-term pressures is gradually converging to central bank’s inflation target of 3%.

In this context – Sejko went on saying – future monetary policy decisions will continue to be guided by new information, particularly by analyses and assessments of domestic inflationary pressures.

“These decisions will always be aligned with our price stability objective and remain consistent with the fiscal policy stance and developments in the exchange rate,” Governor Sejko said.

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Jonida Teta Kacani, Deputy Director of the Supervision Department at the Bank of Albania, said Friday that the Central Bank has approved regulatory changes aimed at further reducing the maximum effective interest rate for installment loans in small amounts and protecting citizens in the face of lending practices applied by non-bank financial institutions (microfinance).

In a televised interview, Kacani said that the measures have led to a 3-fold decrease in the interest rate on loans from microfinance institutions.

According to her, the new central bank rules are designed to limit hidden cost and fees and to further cut interest rates and consumer loans cost and increase transparency.

Official data show that non-performing loans issued by non-bank institutions fell 4.17% in the end of 2024 from 4.74% in 2023.

By enforcing stricter criteria and oversight on the non-bank institutions, the Bank of Albania aims to stabilize the microfinance sector and prevent future financial problems.

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The Supervisory Council of the Bank of Albania also decided to maintain the interest rate on the overnight lending facility unchanged at 3.75 and the overnight deposit facility at 1.75%.

The Supervisory Council also reviewed and approved some amendments to the regulations “On Consumer Credit and Mortgage Credit” and “On Transparency for Banking and Financial Products and Services.”

According to central bank, the amendments are designed to increase consumer protection, aiming to further reduce borrowing costs for consumer credit and to enhance transparency for these products, especially for non-banking financial institutions.

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According to central bank data, the average interest rate on lek-denominated consumer loans dropped to 9.36% in the end of July, down from 9.66% during the same period of the previous year.

Bank of Albania notes that the eased lending standards and the decrease in average loan interest have driven the consumer loan portfolio up in 2024.

Commercial banks operating in the country disbursed around 30.5 billion lek in consumer loans, recording a 23% year-on-year increase in the first eight months of the year.

Lek-denominate consumer loans account for around 90% of the total loan portfolio.

Applying a ceiling net interest income rate on consumer loans began in 2022.

According to the central bank, the decision to impose a ceiling rate is designed to protect consumer from potential abusive interest rates, mostly applied by non-bank financial institutions.

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