Inflation rate remains below BoA target

TIRANA, May 8 – Inflation rate accelerated to 1.6 percent in April 2012, after recording record low rates of 0.6% and 1% in last February and March. At 1.6 percent, inflation rate remains 1.4 percent below the central bank’s target of 3 percent reflecting the poor consumer demand as also shown by the performance of government revenues in the first quarter of 2012. In April, 2011 inflation rate was at 4.1 percent, 0.1 percent above the central bank target.
INSTAT year-on-year data show food and non-alcoholic beverage prices, which have the majority impact in the consumer price index, rose by 1.1 percent in April 2012. Domestic agricultural production also contributed with ‘vegetable and potato’ prices down 5.2 percent compared to last March.
Water supply prices are reported to have increased by 21.8 percent after tariffs in major cities were raised in early 2012.
At an unusual record low for the beginning of the year, and failing to stimulate consumer demand, the Albanian economy is heading to deflation risks, experts have warned.
Albania’s central bank itself estimates that by preserving the inflation rate around the 3 percent rate, the monetary policy will continue having positive contribution to the development of the Albanian economy. “This targeted inflation rate and the monetary policy applied for its achievement, positively affects the stability of economic growth rates, as has been proved in recent years. In reality, the target of preserving an unchanged price level, i.e an inflation rate close to zero could correspond to a deflationary situation,” says the Bank of Albania in its 2012-2014 monetary policy document.
Low inflation pressures, on a downward trend since the second half of 2011, have allowed the Bank of Albania to cut the key interest rate by 1 percentage point to a historical record low of 4.25 percent since Sept. 2011 in an effort to stimulate the economy but the moves have been hardly reflected in lower loan interest rates and an increase investments.