Central bank governor Gent Sejko noted that the Supervisory Council finds that the current monetary policy stance is adequate for meeting the Bank’s price stability objective in the future, support economic growth and contain inflation at a stable rate.

“Taking into account these circumstances, the Supervisory Council decided to keep the policy rate unchanged, at 3.0%; keep the interest rate on overnight deposit unchanged, at 2.0%; keep the interest rate on overnight lending facility unchanged, at 4.0%,” Sejko said.

Central bank finds that the Albanian economy continues to settle on a positive development trend. The volume of economic activity, employment and wages have picked up, inflation remains at low levels and under control, balance sheets of private sector and banking sector are sound, financial markets are overall calm, while financing conditions remain accommodative.

Governor Sejko underlined that these developments are in line with the Bank’s expectations.

“They also reflect central bank’s prudential monetary policy that has helped withstand the price shock originating from international markets, without jeopardizing the positive economic growth trend and the financial stability of Albania,” he added.

Sejko noted that the Bank’s updated projections suggest that the Albanian economy will continue to grow over the medium-term horizon, while inflation will return to our target in the next year.

“The Supervisory Council deemed these projections are consistent with the current monetary conditions in economy,” he concluded.

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According to the central bank, the lower key interest rate will ease financial pressure on borrowers by lowering the cost of loans and the decision will also support steady increase in loan portfolio as an important supporting economic growth.

“Lowering the cost of loans will have direct effect on cutting instalment payments of existing loans and will increase the demand for new loans. Therefore, the decision will further fuel consumption and investment growth, generating more employment for the Albanian economy,” the central bank said.

Secondly – the Bank clarifies – the eased monetary policy decision aligns with the recent European Central Bank’s move to cut interest rate for the single currency Euro. This synchronized move eases pressures on further appreciation of the local currency, as well as it eases inflation pressure.

In a response forwarded to ATA, the Bank also says that the decision to ease the key interest rate aims at prevent any effect of the rapid decline in inflation rate on the expectations of economic agents.

Earlier this week, the Supervisory Council of the Bank of Albania decided to lower the base interest rate to 3.0 percent.

In February 2022, the Bank of Albania began tightening its monetary policy in response to rising inflation, increasing the base rate from 0.5 percent to 3.25 percent, with the most recent hike occurring in November 2023.

Governor Gent Sejko explained in a press conference that the positive economic performance and declining inflation were the primary reasons for this decision.

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Parliament demanded that the Bank of Albania commits itself to continuously monitor domestic and international economic developments and formulate a prudent monetary policy to return inflation with its 3% target rate and reduce its cost on the long-term economic growth prospect.

Parliament also urged central bank to carefully look into the developments in the real estate market and carefully monitor exposure of the banking system to this market in order to lower risks in this respect.

Lawmakers also demanded that the bank examines the implications of the innovation of financial markets and products, as well as the monitoring of climate risks in the economic and financial environment.

Parliament also demanded that the Bank improves implementation processes of the macro-prudential policy, focusing on the addition of instruments aimed at systemic structural risks and the completion of the regulatory framework on the requirements that the banking system must meet to ensure adequate cyber protection.

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Central bank said that the inflation rate could have been around 0.4% higher in 2022 and around 6.55 higher in 2023 and 2024 if no actions were made to adjust the monetary policy.

“The interest rates hike also slowed down further inflation increase,” the Bank said.

According to BoA estimates, the increase in interest rates also had an impact on the foreign exchange rate.

In the absence of the interventions of the Bank of Albania, the national currency would have been depreciated by a further 1.6% against international currencies in 2022 and on average by 11% more in 2023 and 2024.

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According to the BoA, the full recovery of the economy and the steady growth of inflation towards the 3% target at the end of 2022, should continue to be supported by a stimulating monetary policy profile, where the key interest rate on lek to continue to be at 0.5%.

The Central Bank emphasized that, “in order to move from easing monetary policy, i.e. low interest rates, to a tight monetary policy, which means an increase in the interest rate, expect a better economic situation before the end of 2022.”

In the light of the current conditions, the Bank of Albania deems that the easing monetary policy will continue for a long period. At least until the second half of 2022, monetary policy will continue with an interest rate of 0.5%. //a.i/

The Governor of the Bank of Albania, Gent Sejko, said at the press conference that, “The Supervisory Council assessed that the current monetary policy stance is appropriate for stimulating economic growth and for the stable return of inflation to our 3% target”.

After discussing the economic and monetary developments in the country and their expected performance, the Supervisory Council decided to keep unchanged the overnight deposit interest rate at the Bank of Albania, at 0.1%.
“Also, the Supervisory Council decided to keep the overnight loan interest rate unchanged at 0.90%,”the Governor announced. //a.i/