TIRANA (Albania), October 3 (SeeNews) – Albania's central bank has decided to keep its key policy rate unchanged at record low 1.0%, it said.
The interest rate corridor in the interbank money market will also be kept unchanged, set at 0.10% for the overnight deposit 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 on Wednesday.
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.
“The volume of economic activity in Albania expanded, leading to a fuller utilisation of production capacities and increase in employment and wages, and build-up of domestic inflationary pressures,” central bank governor Gent Sejko said in the statement.
“The financial situation of Albanian households and firms has been improving reflected, in turn, in the improvement of their balance sheets and the constant decline in the non-performing loan ratio.”
He also said the positive economic developments continue to be sustained by the improvement in the external environment, favourable financing conditions dictated by our accommodative monetary policy stance, the foreign direct investments inflows, and the higher electricity output owing to the favourable hydro situation in this year.
According to data published by Albania's statistical office INSTAT, the Albanian economy grew 4.3% in the second quarter of 2018. Indirect data signal that the growth dynamic will continue in the third quarter, Sejko noted.
“Our projections suggest that inflation will converge toward our target within 2020. Such dynamics will be sustained by the continued expansion of aggregate demand, which will enable employment gains, rising wages, and higher profit margins in line with their historic rates,” the governor said.
He also noted that the exchange rate remains appreciated against the currencies of country’s trading partners, but the appreciation trend decelerated over the summer months.
“Bank of Albania interventions in the foreign exchange market proved to be effective with regard to stabilising the exchange rate in the third quarter,” Sejko noted, adding that the bank’s analyses suggest that the exchange rate risk for achieving the inflation target has been diminishing.