PRESS CONFERENCE
Q&A during the press conference on monetary policy decision-making of the Supervisory Council of the Bank of Albania, 31 August 2010

Question - The first question is about the performance of prices. Why do you think that the sharp increase of prices on some foodstuff products in the international markets will not strongly impact the Albanian inflation rate?

Second, in your press statements, you have repeated many times the importance of maintaining the deficit within the parameters previewed from the reviewed budget. Why this repetition. Does the bank have any concern that the deficit may exceed?

Governor  - On the first question, considering all the available information, we deem that the contribution will not be high, owing also to the low impact of imports in Albania, to a recovery of the overall trade activity, and also to a prudential policy maintained throughout this time from the Bank of Albania and to the firmly anchored inflationary trends in the economy.

With regard to the second question, to be transparent, this was one of the issues discussed today in the Supervisory Council, were it is highlighted the ongoing attention of the Bank of Albania, especially during the last three or four months, in the day to day monitoring of expenditures, to provide the effectively of the undertaken measure for the reduction of the budget deficit. We are confident that, given a prudential management, which is already certified, there exist all the possibilities to stay within the determined limits of budget deficit. That is, I repeat it once more that special attention should be paid on the observation of the deficit. This is a rather important global issue; the fiscal stimulus, the persuasion or stoppage, as well as the careful stance of monetary policy, to maintain the long-term stability of the world economy, I would say, it is the topic issue of all the academic discussions and at the same time of political decision taking at global range.

Question - You stated above that banks have begun to reflect the cut of key interest rate from the Bank of Albania, mainly with regard to deposits and securities' interest rate, what about loans?

Governor - No, this is not what I exactly said. In the material I stated that we have a positive development as regards to the cut of the entire T-bills yield segment, by 10 percentage points. The prudential position for the reduction of the budget deficit and the reaction of the monetary policy have brought about a subsequent reflection of the private sector and financial market in general, in respect of the cut of T-bills interest rate, establishing the indispensable preconditions for a further cut of deposits and lending rates.