February 2 (SeeNews) - Albania's central bank said it decided to keep its key interest rate at 1.25%.
"In conclusion to the discussions on the most recent economic and monetary developments and the expected outlook, the Supervisory Council decided to keep unchanged the monetary policy rate at 1.25%," the central bank said in a statement on Wednesday.
The Bank of Albania's supervisory council also decided to maintain the interest rate corridor in the interbank money market, set at 0.25% for the overnight deposit rate and 2.25% for the overnight lending rate.
At its previous meetings in October and in August, the bank also left unchanged its key rate. The last change was made in May, when the central bank lowered the rate by 25 basis points to record low 1.25%.
In December, Albania's consumer prices increased by 2.2% year-on-year. The upward trend in inflation in the last quarter of 2016 is due to the increase in food and oil prices, the bank governor Gent Sejko said at a news conference on the monetary policy decision.
Inflation is anticipated to return to the central bank's 3% target around the end of 2018.
"Our outlook for the future remains positive," the governor said. "The Bank of Albania expects economic growth to pick up over the next two years and inflation to return to target within 2018".
Albania's economy expanded by 3.3% in the January-September period of 2016. The bank anticipates that the country's economy growth for 2016 will be similar to that recorded in the first nine months.
The bank governor also pointed to other recent positive economic and financial developments in the country, such as the expansion of aggregate demand, the increase of employment, the fiscal balance surplus for January-November, which was driven by higher revenues and lower expenditures.
"Economic and financial developments reflect the combined effect of the consolidating fiscal policy and the accommodative monetary policy implemented during the year," Sejko said.
Lending to the economy is increasing and in November it was 3.4% higher year-on-year, the governor said. Bank of Albania expects lending to improve further in 2017, as a result of the gradual recovery of credit demand and the implementation of the measures for reduction of the share of non-performing loans (NPLs).