May 4 (SeeNews) - Albania's central bank said it decided to keep its key interest rate at record low 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 market, set at 0.25% for the overnight deposit interest rate and at 2.25% for the overnight lending rate.
The central bank last changed its key interest rate a year ago, lowering it by 25 basis points.
"Our updated medium-term projections suggest that the Albanian economy will continue to grow and that inflation will return to target within 2018," central bank governor Gent Sejko said.
In the first quarter of 2017, inflation averaged 2.4%, with the rise in consumer prices driven mainly by higher food and oil prices. Inflation is expected to average around 2.3% in 2017.
"From the macroeconomic perspective, the upward inflation trend is underpinned by the improvement of economic activity and higher capacity utilisation, rising prices in global markets, and better anchoring of inflation expectations," Gent Sejko said during a press conference following the monetary policy decision.
Albania's economy expanded by 4% in the last quarter of 2016 and by 3.5% in the full year, with services and construction providing the largest contribution to economic activity, Sejko recalled, citing INSTAT data.
The recorded economic growth reflected the expansion of both domestic and external demand for goods and services, the central bank governor added.
"Private consumption and investments increased, driven by the low interest rates, expansion of employment, improvement of confidence, and high FDI inflows," Sejko said. "In parallel, economic growth in the fourth quarter benefited from the increased activity in tourism and the recovery of growth in the exports of goods."
According to Gent Sejko, this upward trends continued in the first quarter of 2017.
Nevertheless, Sejko underlined that the complicated political situation in the country puts the economy at risk.
"In the short term, the tense political situation at home may contribute to increased uncertainties and postponing investments and consumption," he said, and added that in the medium term risks are related mainly to the uncertainties in the external environment and the speed of credit recovery.