Tirana, 27 March 2008. The Bank of Albania warns of another price increase in upcoming months in a statement recently released. A price increase is considered inevitable because of the increase in oil and grain prices.
According to officials, Albanian consumers are going to pay even more for their basic products and services. In a written statement, The Bank of Albania declared, “The prognosis of the Bank of Albania for the next twelve months identifies that inflationary risks are still present for the mid-term period, especially in the conditions of the continuous increase of the prices in the international marketŢ
Inflation
The price increase accelerated during the second half of last year. The inflation rate was 4.4 percent in September, and four percent in October, 2007. For many months, the inflation rate was well above the three percent target inflation of the Bank of Albania. According to experts, the pressure on prices originated on the supply side: the increase of oil and grain prices. The rising prices forced the Bank of Albania to take the only action it could. The Bank increased interest rates by 0.25 percent point, up to 6.25 percent.
Temporarily, these measures were having an effect. The inflation rate for February, 2008 was 3.56 percent, slightly above the three percent target inflation of the Bank of Albania, but inside tolerance margins. However, March was another bad month for Albanian consumers. Oil prices hit an all time record; grain price increased as many countries imposed export restrictions; and KESH, the Albanian power supplier, increased the price of electricity for consumers. Experts predict the inflation rate for March is going to be well above the three percent target.
Social cost
Fixed-income groups, including pensioners and state employees, will be first to be hurt by price increases, because they are forced to pay more for the same quantity and quality of products. Data for the last month has not been released, however, there is no doubt that it was another strong blow to real income.
