Monetary policy report 2012 Q4

The Albanian economy improved slightly in the second half of 2012, but economic activity remains below the potential. The banking system has sound and liquid balance sheets, but remains highly prudent in terms of financing long-term investments. From the macroeconomic viewpoint, all inflation determinants contributed to keeping it low. Consumer prices rose 2.4% annually, while annual inflation rate averaged 2%. Despite estimates for positive economic growth in 2013, economic activity is expected to remain below its potential and inflationary pressures from the demand side are expected to remain low. Based on expected economic and monetary developments, in its meeting on 30 January 2013, the Supervisory Council of the Bank of Albania decided to cut the key interest rate by 0.25 percentage points, bringing it down to 3.75%. As Inflation rates are expected to be low over the policy-relevant horizon, the monetary policy will continue to be stimulating, in the next four quarters.