TIRANA (Albania), August 1 (SeeNews) – Albania's central bank said on Wednesday it will keep its key policy rate on hold at 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 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.
Also, the supervisory council considered it necessary to continue the programme of foreign currency purchases in the domestic market, in order to prevent a rapid appreciation of the lek, in concordance with its price stability objective.
“The Albanian economy continued to pursue a positive development trend in the first half of 2018,” central bank governor Gent Sejko said in the statement.
“Economic activity has been proceeding along an upward growth path, enabling thus the expansion of employment, increase in wages, improvement of firms’ financial situation, and gradual build-up of inflationary pressures,” Sejko added.
According to data published by the country's statistical office, the Albanian economy grew by an estimated 4.45% year-on-year in the first quarter.
In the last quarter of 2017, Albania's economy grew by an estimated 3.36% year-on-year.
Sjeko also said that the acceleration of the pace of economic growth in the first quarter reflected the rapid growth in electricity production, in response to favourable weather conditions.
“In the longer term, the expansion of economic activity was supported by the pickup in private consumption and investments, whereas the deficit of external trade expanded and the fiscal policy continued the consolidation trend. Indirect data suggests that these development trends have been carried into the second quarter,” he noted.
“Our projections suggest that inflation will converge toward our target within 2020. This projection takes into account the positive dynamics of economic growth and our expectations for the return of the economy to equilibrium in the first half of next year,” Sejko said, adding that the expectations are also based on the assessment that disinflationary pressures from the appreciation of the exchange rate will remain transitory.
According to the Albanian central bank governor, the domestic financial market remains calm and liquid, but appreciation pressures of the Albanian lek remain present in the foreign currency segment.
“The recent monetary policy measures - lowering the policy rate to 1.0% and intervention in the domestic foreign exchange market, with a view to preventing the rapid appreciation of the exchange rate, have proven to be effective,” Sejko noted, adding that the Bank of Albania is of the opinion that the current monetary policy stance remains adequate.