TIRANA (Albania), July 4 (SeeNews) – Albania's central bank said on Wednesday it will keep its key policy rate unchanged at a record low 1.0%.
The interest rate corridor in the interbank money market will also be kept unchanged, set at 0.10% for the overnight deposit interest rate and at 1.90% for the overnight lending rate, Bank of Albania said in a statement following a meeting of its rate-setting supervisory council.
The central bank last changed its monetary policy rate in early June, lowering it by 25 basis points to 1.0% amid strong appreciation of the domestic lek currency increasing downside pressures on inflation.
“Albanian economy continues on a positive development trend. In particular, economic growth in the first quarter was higher than our expectations, while inflation was slightly up in April and May, compared with the first quarter,” central bank governor Gent Sejko said as quoted in the statement.
According to data by the country's statistical office, the Albanian economy grew by 4.45% in the first quarter.
“Financial markets are characterised by low interest rates and improving liquidity indicators, but the exchange rates continue to appear strong and credit growth remains sluggish,” Sejko added.
He also said economic growth continues to be driven by a stimulating monetary and financial environment, the increase of employment and improved confidence and the upswing in the external demand.
“Our expectations for the future remain positive. Based on the current development trends and their underlying factors, the Bank of Albania expects further growth of economic activity and a better utilisation of production capacities in the medium-term horizon. These developments will contribute to a faster increase in wages and production costs, enabling the return of inflation to target within 2020,” the central bank governor noted.
Also, the bank's supervisory council deemed it necessary to continue foreign-currency purchase operations aimed to eliminate the temporary excess of foreign currency in the market and decelerate the further appreciation of the exchange rate, which would hamper the achievement of our price stability objective.
The intervention in the market, approved on June 6 and implemented in the next days, has already provided positive effects, by decelerating the strong appreciation trend of the exchange rate and providing a more calm and normal foreign exchange activity in the market, the statement added.