Monetary Policy Report Q4 - 2014

In the second half of 2014, the Albanian economy improved, but overall inflationary pressures remained weak and inflation continued to stand below Bank of Albania's target. Although upward, aggregate demand is still insufficient to ensure complete utilisation of production capacities in the economy and generate stable growth of employment, wages, profit margins and final prices in the economy. Additionally, imported and primary commodity prices and the performance of inflationary expectations continued to provide low pressures on consumer prices. Our macroeconomic projections point to the closure of the negative output gap and a gradual return of inflation to target in the medium-term period. These projections remain conditioned by the recovery of private consumption and investments. Under these circumstances, the Supervisory Council deemed it necessary to lower the key interest rate further, down to 2.0%.