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

The Supervisory Council of the Bank of Albania, in its meeting of April 27, 2005, after considering the proposal of the Monetary Policy Department of the Bank of Albania, decided to approve:

Monetary Policy Report of March 2005

Main highlights of March 2005

• Annual average inflation rate during first quarter of 2005 was 2.5 per cent, close to lower limit of the targeted band of the Bank of Albania. The annual inflation rate of March was 1.7 per cent, whereas the monthly inflation rate was 0 per cent.
• March was characterized by a negative rate of food items, and a relatively high annual inflation rate of the group "Rent, water, electrical power", whose inflation was impacted by electrical power price rise in January of this year.
• Growth of the budget spending and exceeding of the expenditure plan for February might have not exerted inflationary pressures until March.
• Monetary policy went on maintaining the smoothing direction, aiming at further cutting the interest rates in the banking market and encouraging the economy development through lending. Base interest rate cut by 0.25 percentage points at end of March was done under the conditions of low current and expected inflation rates and in the presence of positive performance of monetary indicators.
• Monetary indicators performance during February was characterized by further shifting of money supply towards long-term assets. The ratio of currency outside banks at end of February reached to 25.4 per cent, marking its lowest historical level.
• Annual rate of money supply growth in February reached to 15.1 per cent, against 13.7 per cent of this indicator at end of January. Money supply growth was based mainly on foreign currency deposits rise, while annual rate of M2 aggregate reflected a slight rise due to moderate performance of Government demand for money.
• Credit to economy during two first months of 2005 had a positive performance. Credit balance was increased by about Lek 6 billion, reaching the level of Lek 76 billion. February of this year was presented as the period with the largest growth of credit balance, by about Lek 4 billion.
• During March, the Lek interest rates went on falling in the money and deposit market, but not in the lending market.
• Developments in foreign exchange market indicated a stability of the lek value versus the main currencies, euro and usd. Appreciation of the lek on yearly basis against two main currencies has smoothed inflationary pressures from imported consumer goods and has served as an amortizer of the oil price rise.

Monetary policy report of March 2005 will be wholly published in the Official Bulletin and will be disclosed at the Bank of Albania web site.

This meeting of the Supervisory Council analyzed the realization of the Bank of Albania budget for the first quarter of 2005, treated the situation of money in circulation over end of 2004 and defined measures for improving the money in circulation structure for the current year, as well as adopted some other decisions on the Bank of Albania activity.