PRESS RELEASE
Questions and Answers at the press conference of the Governor of the Bank of Albania on the monetary policy decision, 29 February 2012

Question: Taking into account that, in January, inflation was down to 1.6%, would this be a problem for the economy as consumption remains low, despite signals for its recovery. Does the low inflation constitute a concern for the economy?

Answer: We think that inflation will range within the medium-term target of the Bank of Albania, in other words, it will range between 2-4%. Nonetheless, the Bank of Albania, with its recent decisions, including today's position, has responded transparently on its inflation target. In accordance with forecasts, inflation is well anchored. As I mentioned in the document, in its monetary policy decision-making, the Bank of Albania will remain watchful on developments in the external and domestic economy.

Question: In the last two auctions, the Treasury bill yield increased despite the key interest rate cut by the Bank of Albania. Moreover, in the last auction, the Government did not manage to raise the requested amount. In your view, what are the reasons that may have led to the Treasury bill yield increase and do you foresee any risk that the government may not raise the planned borrowing in the domestic financial market?

Answer: I would like to start my answer underlining that this phenomenon indicates that the market is working rather well. We have found that since September, the monetary policy of the Bank of Albania has been transmitted very well to the interbank market, in deposit and loan interest rates. A good transmission is also expected for longer term maturities. We should bear in mind that transmission of monetary policy decisions into the economy materialises only after 2 to 8 quarters. As regards your question on yields, I would say that the market is operational and in balance with the supply and demand as well as our forecasts. There is, naturally, some volatility, but we may not speak yet about a long-term trend. I think that all the requisites are in place for the market to handle future demand.

Question: Two days ago the head of the IMF warned that the global economy, in addition to the credit crisis, is also menaced by oil price rise. Do you see this as a risk to the Albanian economy as well? If yes, what would be the consequences? Three years ago, in 2009, you suggested to the government to start negotiations with donors and international institutions to obtain access in their funds. Today, there are ongoing negotiations, but their conclusion seems farfetched due to the terms imposed.  Would you still give the same suggestion?

Answer: On the first question, I would say that the Bank of Albania is vigilant and has factorised elements such as oil price in its decision-making. I think that all the instruments are available for timely action to keep inflation in balance. On your second question, the Bank of Albania and the Albanian economy are always open to benefit from various funds and maintain the country's macro-financial stability. These days, it is important and advisable to attract and channel not only funds but also direct investments into the economy. That is to say, the entire macroeconomic and financial structure of Albania should be oriented towards rapid response, taking into account what we have always said and I have often reiterated that we need to take advantage of competition factors of our economy, so that these funds are made available to implement projects in the future. We remain open for concrete discussions to obtain such funds. I think that Albania has all the requisites in place to benefit from them. There is total engagement of the Albanian economy to benefit, but as I have said before, prudence is crucial nowadays. I would like to assure you that the Bank of Albania is heedful, on the prudence side, to maintain the macroeconomic parameters in order for the willingness of international institutions to be as effective as possible in supporting economies, such as the Albanian one, in the context of the actual global crisis.