PRESS CONFERENCE
Address by Mr. Ardian Fullani, Governor of the Bank of Albania, to the Press Conference on the decision of the Bank of Albania Supervisory Council on raising the interest rate by 0.25 percentage point, to 6.00 percent

The Supervisory Council of the Bank of Albania, in its meeting of 26 September 2007, after dwelling on the recent economic-financial developments, decided to raise the base interest rate (repurchase agreement interest rate of seven-week maturity) by 0.25 percentage point, to 6.00 percent.

The data on the performance of economic indicators reveal the presence of risks that exert upward pressures on inflation rate, beyond the Bank of Albania target. The administered price rise and high international prices of raw materials are being transmitted to domestic products cost. During two last months, the developments in agricultural products prices have reversed the downward trend that had dampened the inflationary pressures over the two last years. Also, the increasing energy cost to the economic activity is being evidenced in the overall price level performance. These effects are expected to be extended in time, maintaining the pressures of the supply side.

Credit growth has supported the economic activity over two last years. High lending paces have induced the aggregate demand and have permitted the transmission of higher costs to consumer price rise. The growth of the economy demand for goods and services has been associated with current account deficit enlargement.

This decision is further to earlier communications publicly made by the Supervisory Council. Our determination to keep inflationary expectations anchored around 3 percent, which is the numeric target of our monetary policy, is in its focus.

Additional information during September-October will elucidate the need for further steps in terms of stabilizing the inflation expectations, in accordance with the Bank of Albania target.

Taking into account that the Bank of Albania is the licensing and supervisory authority of the banking system, the Supervisory Council emphasizes its willingness to fulfill all the legal responsibilities, not only in terms of consumer price stability but also in terms of banking system financial stability.