TIRANA, June 8 – Consumer prices slightly accelerated last May but continued to remain below the central bank’s 3 percent target. Data published by the country’s state statistical institute, INSTAT, show the inflation rate recovered to 0.7 percent last May following modest growth of 0.2 to 0.3 percent in the previous three months, sparking deflation concerns which the country’s central bank has downplayed with the sharp decline in international oil and food prices.
Food and non-alcoholic beverages, the key item in the consumer basket, grew by an annual 2.3 percent last May.
Consumer prices increased by an average of only 0.6 percent in the first five months of this year, hitting a 15-year low.
Transport prices registered the highest 4.7 percent annual decline last May contributing by -0.29 percentage points to the inflation rate.
Albania’s annual inflation rate slightly accelerated to 1.95 percent in 2015 after hitting a 15-year low of 1.6 percent in 2014, yet standing 1 percent below the central bank’s 3 percent target which is estimated to have a positive impact on the country’s economic growth, according to INSTAT.
The disinflation and deflation situation has also affected regional countries and the euro area where the drop in international oil prices has been better reflected.
Faced with deflation risks, the country’s central bank cut the key interest rate to a new historic 1.25 percent last May in a new effort to boost sluggish consumption and lending.
In its monetary policy document, the central bank says that “in practice, an inflation rate close to zero could correspond to a deflationary situation.”
Albania’s central bank expects the inflation rate to remain at about 2 percent in 2016 and return to its 3 percent target only by mid-2018.
