Key rate kept unchanged at 2.5%

TIRANA, Oct. 30 – With inflation rate at record low levels, a situation hinting sluggish demand, Albania’s central bank has decided to keep the key interest rate unchanged at a record 2.5 percent in an effort to boost consumption and lending which has returned to positive growth rates.
“Our forecasts and preliminary data indicate positive growth in the third quarter of the year, supported by an increase in private demand,” said the Bank of Albania’s Supervisory Council which is now led by Elisabeta Gjoni, the first deputy governor, who will be the acting governor until the election of a new governor.
Albania’s annual inflation rate dropped to 1.5 percent in September 2014, remaining below the central bank’s lower limit of the target range of 2 to 4 percent for the sixth month in a row. The situation reflects poor demand as the Albanian economy continues facing sluggish growth, with the estimated growth in the first half of this year at only 0.5 percent after the GDP slightly contracted in the second quarter of the year.
Albania’s central bank estimates that by preserving the inflation rate at around the 3 percent rate, the monetary policy will continue having a positive contribution to the development of the Albanian economy. For the first three quarters of 2014, average inflation rate is estimated at 1.75 percent, remaining below the central bank’s mid-term target of 3 percent.
The Bank of Albania supervisory council which has been reduced to five members after the arrest of its governor over a Euro 5 million theft scandal and the resignation of another member, said returning inflation to the 3 percent target would require the preservation of the key interest rate at low levels for several consecutive quarters.
The last time the Bank of Albania eased its monetary policy was in late May 2014 when it cut the key rate by another 0.25 percent to a historic low of 2.5 percent.
The cut to the key interest rate was the second for this year and the eleventh consecutive slash by 0.25 percentage points since September 2011 when the central bank adopted an easier monetary policy to handle crisis impacts.