Former BoA governor says repo rate increase delayed

TIRANA, March 29 – Shkelqim Cani, a former governor of the Bank of Albania, says the central bank’s latest move to raise the repo rate is delayed and should have been taken long ago.
“In my opinion, this step should have been taken by the bank’s policy makers since October-November 2010. In this way, the price increases and inflation rate going out of control could have been somehow curbed,” Cani told reporters this week, adding that it remains unknown if the late move was because of neglect or inability.
“This move should have been made months ago in order to be more predictive or precede the situation under the Bank of Albania’s functions,” said the former governor, now a financial expert for the opposition Socialist Party.
According to him, the slight increase in the repo rate will have minor impacts in loan or deposit interest rates, but will be felt more in treasury bill yields.
Last week, Albania’s central bank decided to raise the repo rate by 0.25 percentage points to 5.25 percent after keeping it unchanged at 5 percent, one of the lowest historical levels, for the past 8 months. Governor Ardian Fullani said the move was aimed at keeping inflation rate in check following a sharp rise in consumer prices last February. Data from the country’s Institute of Statistics show the Consumer Price Index (CPI) rose 4.5 percent year-on-year in February 2011, exceeding the central bank’s target band by 0.5 percent. Compared to last January, the inflation rate was up 2.3 percent mainly because of the ongoing rise in food, vegetable, tobacco and medicine prices. In February 2010, the CPI was up 4.7 percent year-on-year.
This is the first time the central bank is raising the key interest rate for lek after a lowering trend aimed at boosting lending which continued until July 2010, when the repo rate was lowered by 0.25 percentage points to 5 percent.