PRESS RELEASE
The Supervisory Council of the Bank of Albania decided to cut the core interest rate by 0.25 percentage points

The Supervisory Council of the Bank of Albania, in its meeting of March 30th, 2005, decided to approve the cut of core interest rate of the Bank of Albania by 0.25 percentage points.

Following this change, the Repo interest rate has been lowered to 5.0 percent, thus recording another historical minimum since being used as the main instrument of monetary policy implementation. The easing of monetary policy is consistent with the required monetary conditions to maintain the targeted inflation rate and the main monetary equilibriums.

The decision on cutting the core interest rate is based on the performance and expectations at controlled levels of inflation and monetary indicators. Annual inflation rate was kept within the targeted range of Bank of Albania during the nine-months period, tending to come down to the bottom limit of the targeted band during the last months. The absence of aggregate demand pressures, the limited presence of shocks to inflation, as well as the positive developments in productivity and exchange rate, have created a stable inflationary environment.

Bank of Albania estimates that the macroeconomic situation is favourable to maintain price stability even over the short-term run. The current tendencies and expectations show that inflation rate will tend to be within the 2-4 percent targeted range during 2005, while economy development rates will be similar as those of the past years. In this context, Bank of Albania aims at undertaking a more active role in promoting the economic activity, taking into account even the accommodation of negative effects in the economy that may be generated by the by oil price rise recently noted in the international markets.

In this context, the cut of core interest rate aims at further enhancing the monetary incentive, accumulated by the easing steps of monetary policy conduct during the last year. The reduction of the core interest rate is expected to affect the decline of interest rates of the financial market segments in Lek: interbank market; Lek deposits market; Treasury bills market; and Lek credit market. The cut of the interest rate will foster the demand for Lek credits, increasing its weight in credits and creating appropriate conditions for accelerating its progress in the future.