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The Bank of Albania keeps the basic interest rate unchanged

2023-02-01 17:30:52Biznes SHKRUAR NGA REDAKSIA VOX
The Bank of Albania keeps the basic interest rate unchanged
Governor Gent Sejko

The Supervisory Council of the Bank of Albania decided today to keep the basic interest rate unchanged at 2.75%, for the second meeting in a row.

In his speech after the meeting, Governor Gent Sejko argued this decision with the fact that the data of the last months and mainly those related to inflation have turned out to be better than the expectations of the central bank.

"The new information received in the analysis was, in general, better than our expectations. Inflation decreased in November and December, economic activity continued to grow in the second half of the year, while the effect of the normalization of the stance of monetary policy is appearing more fully in the financial markets. These trends are expected to continue during the next quarters. The forecast update suggests that inflation will gradually decline during 2023 and return to target in the first half of 2024. The decline in inflation will reflect the further reduction in inflation in international markets and the cumulative effects of the normalization of the policy stance monetary in the country. These consequences appear in the form of controlling the expectations of market agents for inflation, supporting the exchange rate,

However, the Governor emphasized once again that the reduction of inflation close to the 3% target will require further normalization of the monetary policy, through the increase of interest rates.

"The Supervisory Council reaffirms its judgment that high inflationary pressures remain the main risk to the sustainable and long-term growth of the country. Also, he emphasizes that, based on current information, further normalization of the stance of monetary policy remains a necessary measure for respecting our price inflation objective. This normalization becomes even more necessary, in the presence of a risk balance for inflation, which is still on the upper side. The Supervisory Council emphasizes that the speed and intensity of this normalization has been and will remain a process guided by new data," said the Governor.

According to the Bank of Albania, economic activity in the country continued to grow during the second half of 2022. From a sectoral perspective, economic growth was supported by the expansion of activity in the construction and service sectors, while industrial activity shrank and agricultural production was almost unchanged. From the perspective of demand, economic growth was fueled by the growth of family consumption and private investments, while the public sector and net foreign trade exchanges had a restraining effect.

Economic growth has been accompanied by an increase in employment and wages. Employment rose 4.2%, the unemployment rate fell to a new all-time low of 10.6%, and the average private sector wage rose 12.3% in the third quarter.

The Supervisory Council of the Bank of Albania assesses that the positive performance of the labor market creates premises for the sustainability of economic growth in the future, but, on the other hand, also signals a rapid increase in production costs and pressures on consumer prices.

The governor said that the Albanian economy is expected to continue growing, while the main indicators of financial stability are expected to remain under control.

"The economic growth of the country is expected to remain in positive territory, fueled by the healthy balances of the private sector, by the positive dynamics of the labor market, by the reduction of uncertainty and by a still accommodative financial environment. However, the pace of economic growth is expected to slow slightly during 2023 and return to historical growth rates in the medium to long term. This trend reflects, mostly, the expected dynamics of foreign demand and the action of basic effects," says the recent statement of the Supervisory Council of the Bank of Albania.


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