PRESS RELEASE
Meeting of the Supervisory Council of the Bank of Albania

The Supervisory Council of the Bank of Albania, in its meeting held on February 23, 2005, after reviewing the proposals of some departments of the Bank of Albania, decided to approve the following:

1. Monetary policy report for January 2005

Main highlights

• Annual inflation rate was 3.3 percent in January, being within the 2-4 percent of targeted range of the Bank of Albania. The average annual inflation of January marked 2.9 percent
• Increase of annual inflation rate in January was due to the administered price rise of electric energy, according to the Institute of Statistics. The other groups' contribution has lead to the reduction of annual inflation rate
• Supply and demand factors have provided generally a stable impact on price performance during the last year. The stability of macroeconomic indicators was followed by stable domestic value of Lek (low inflation) and the strengthening of its external value (exchange rate appreciation)
• M3 annual growth rate resulted 13.1 percent, from 7.6 percent being in the previous year. This growth was due to the increase of economy demand for monetary assets, without exerting inflationary pressures
• The high demand of economy for Lek monetary assets was reflected in the growth of M2 weight and in a decrease of foreign deposits weight on M3 monetary supply
• December was the month of the highest monthly demand of Government for monetary assets. The financing through the Savings Bank privatization revenues was the main financing way while the remaining part was financed by the issuance of both Treasury bills and two-year bonds
• January highlighted a growth of liquidity excess of the banking system, at an average of LEK 2 billion. The growing trend of liquidity has persisted even during the first weeks of February
• Liquidity excess was followed by a further decline of interest rates during January and in the beginning of February. During this period, interest rates in Lek deposits' market, in both primary and interbank markets, have recorded the lowest values since 13 years
• Lek has deepened its appreciation versus both foreign currencies, Euro and US dollar, in December. Monthly appreciation against US dollar was 4.5 percent while against Euro, 1.44 percent. In January a change was noted in terms of Lek exchange rate. Lek, compared to the year-end of 2004, was appreciated by 0.2 percent against Euro and depreciated by 4.7 percent against US dollar

2. In this meeting the Supervisory Council approved also the allocation of Bank of Albania's profit for year 2004, reviewed the information "On the performance of international markets, financial instruments and foreign reserve during the period December 2004 - January 2005", and analysed as well the on-site inspections conducted by the Supervision Department of the Bank of Albania to commercial banks during the period July - December 2004.