About Inflation

According to the Law “On the Bank of Albania”, the primary objective of the Bank of Albania is to achieve and maintain price stability. By ensuring price stability, the Bank of Albania provides a direct contribution in sustaining macroeconomic balances in the country, promoting economic growth and improving the standard of living, as well as safeguarding the financial stability of the system.

Achieving and maintaining price stability implies pursuing low but positive inflation rates and preserving them for relatively long periods of time. In quantitative terms, the Bank of Albania defines price stability as the keeping of an inflation rate at 3.0 percent, with a tolerance band of ± 1 percentage points. The inflation target will be measured by the annual rate of change in the total Consumer Price Index, calculated and published by INSTAT. This target is applicable throughout the 2009-2011 period.

This quantitative definition of price stability is concurrent with Albania’s status as an emerging economy, whose main priority is economic integration with the European Union countries. In the process of finding the proper equilibrium as a market economy and achieving the necessary structural convergence, emerging economies are characterized by a higher relative price volatility. Both the keeping of the inflation target at the same numerical figure as in the previous years and the extending of the time span for the announced inflation target will positively contribute to the better anchoring of the public’s inflation expectations around the Bank of Albania’s declared target.

The Bank of Albania estimates that the monetary policy will continue to provide a positive contribution to the progress of the Albanian economy by targeting an inflation rate at around 3.0 percent. Evidence from recent years has shown that such a level of inflation and the monetary policy employed to achieve it helps promote the economic growth of the country.