TIRANA (Albania), December 27 (SeeNews) – The Bank of Albania 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 earlier this week.
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 lek currency increasing downside pressures on inflation.
“Although the available information is partial and indirect, the analysed data suggest that economic activity in Albania trended upward in the second half in 2018,” central bank governor Gent Sejko said in the statement. “Economic growth is reflected in the better utilisation of production capacities, as shown in the increase in employment, the decrease in the unemployment rate and the build-up in domestic inflationary pressures.”
He also said that the performance of Albania's economy has been overall in line with the central bank’s previous expectations and does not bring about significant changes to projections.
“Among others, it evidences the positive impact of the accommodative monetary policy of the Bank of Albania and suggests that the current stance of this policy is adequate for both ensuring economic growth rates in line with the production potential of the country and guaranteeing the convergence of inflation toward the target within 2020,” Sejko noted.
The expansion of economic activity appears to reflect mainly the growth in industrial production and services, Sejko noted, adding that available data show that the growth pace of electricity production has been slowing down in the third quarter, suggesting a slight deceleration of the economic growth rate in the second half of the year.
“In balance, the overall context of economic and financial developments in Albania remains positive,” the governor said, adding that the central bank’s selective interventions in the foreign exchange market during the summer period has created a liquid financial environment with low interest rates, and has mitigated the effect of appreciation pressures on the exchange rate.
According to Sejko, the low interest rates have also helped in restructuring loans, easing the debt servicing costs and improving the financial system stability.
“The Supervisory Council deemed that the balance of risks remains skewed to the downside,” Sejko noted, adding that these risks are related to both potential shocks that may come from the external environment, and the speed of improvement of the business climate and of lending in Albania.