Objective and strategy

To achieve and maintain price stability is the main objective of BoA’s monetary policy. Global theory and practice suggest that price stability is the greatest contribution that the central bank can make to sustain the long-term economic growth of the country. More specifically, by ensuring price stability, the Bank of Albania makes a direct contribution to sustaining the macroeconomic balances in the country, lowering the risk premium, promoting a stable economic growth and improving the long-term welfare, as well as safeguarding the financial system’s stability.

In quantitative terms, the Bank of Albania defines price stability as the keeping of the consumer price inflation rate at 3.0%, in the medium term.  The inflation target is the annual rate of change in the Consumer Price Index, which is measured and published by INSTAT.

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 around 3.0%.

 

The deviation of the medium-term inflation forecast from the target, based on a comprehensive analysis of economic indicators, will be the main indicator of the balance of inflationary pressures in the economy and of the desired monetary policy response.

In addition to measuring inflation as the annual change in the Consumer Price Index, the Bank of Albania uses other measures – namely core inflation, tradable and non-tradable inflation, and the inflationary expectations of economic agents - in order to improve the monetary policy decision-making process. These measures provide a more comprehensive basis for more pragmatic decisions.

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