On the meeting of the Supervisory Council of the Bank of Albania on 30 January 2008

Publication date: 30.01.2008


The Supervisory Council of the Bank of Albania, in its meeting entirely dedicated to monetary policy decision-making, after reviewing the latest economic - financial developments, decided to leave the core interest rate unchanged at 6.25 per cent.

The annual inflation rate turned out to be 3.1 per cent, very close to the target of the Bank of Albania. During December it continued the falling trend manifested in November. The consumer prices developments show mainly the effect of the alimentary products.

In November the annual growth rate of M3 aggregate dropped to 12.3 per cent from the average level of 16 per cent of 2007. The second part of the year was characterized by a slowdown of the monetary indicators growth, down to the minimal values of the monetary expansion recorded in the last 2-3 years. This conduct has been affected by the positive balance of the fiscal sector, and also by decrease of the foreign currency position of the banking system.

Over November, the annual credit rate to the private sector slow downed to 49 per cent, while the credit weight against M3 has increased to 37 per cent. Although the slowdown of the annual trend, the credit effect on the monetary and macroeconomic developments remains stable. The current credit growth has preserved the main effect on the broad money growth in the economy and partly in the foreign account.

The signal of monetary conditions tightening over the last quarter of the year has continued to spread in the markets even during December. Year-end data show an increase of rates in the money market, in the securities market, in the deposits and in the credit for the economy.

Over December, the Lek in effective nominal terms on annual basis results to be over appreciated by 1.5 per cent. This figure is comparable with the one of the previous year. The stable macroeconomic situation and also the deepening of the difference between domestic and foreign currencies interest rates, support the appreciative pressures of the domestic currency.

The Supervisory Council of the Bank of Albania paid a special attention to the BoA specialists' forecasting for the future twelve months, as well as to the banking system expectations regarding inflation, exchange rate and core interest rate.

The risk balance analysis and the forecasting for the future twelve months, give signals of a more balanced situation among the stimulating and inhibitive factors toward the inflationary pressures in the economy. However, the risk factors are still present and they are the same with the previous stated by the Bank of Albania.

Based on these reasons, the Supervisory Council of the Bank of Albania considers the anchoring of inflationary expectations around the numeric target of 3 per cent in the near and far future dictates the need for a higher attention on the analysis of the balance of risk factors.