The interest rate does not change, Sejko admits: The strengthening of the lek is losing its naturalness, we can intervene

2023-08-02 17:42:06Biznes SHKRUAR NGA REDAKSIA VOX
Governor Gent Sejko

The strengthening of the lek, according to Governor Gent Sejko, has caused Albania to have one of the lowest levels of inflation and the greatest economic growth in the region. Stopping the fluctuations in the exchange rate, he has listed several reasons.

"The Council considers that the strengthening of the exchange rate has enabled the Albanian economy to have one of the lowest levels of inflation, interest rates and financing costs as well as one of the highest levels of economic growth in the region, but we remain attentive to the speed of the strengthening and fluctuation of the course during the last months. Remittances, tourism, foreign investments, so these show that we have a strengthening of the exchange rate", concluded the head of the Bank of Albania.

So far, this fluctuation, according to Sejko, has not caused damage to the foreign exchange market or economic stability. However, he said that exchange rate fluctuations, especially after July, have become stronger, signaling the possibility of disturbances in the foreign exchange market. In the event that these fluctuations will continue, the Bank of Albania may consider temporary interventions to stabilize the market or increase planned purchases of Euros for foreign exchange reserve needs. According to him, until now during 2023, the Bank of Albania has bought 170 million euros in the domestic foreign exchange market, mainly through auctions planned for increasing the reserve.

"However, the rate of strengthening of the exchange rate remains high and fluctuations in the foreign exchange market have increased. The Supervisory Council emphasizes that the Bank of Albania remains attentive to the speed of strengthening and the increased fluctuations of the exchange rate during the last months. If they expand further, these phenomena could harm the normal functioning of the foreign exchange market, as well as – potentially – our objective of price stability and financial stability. If these premises are established, the Bank of Albania reserves the right to intervene in the domestic foreign exchange market, in fulfillment of its legal mandate," the statement of the Supervisory Council states.

Despite the still present risk of inflation, the Supervisory Council of the Bank of Albania has decided to keep the base interest rate for the lek unchanged at 3 percent.

The Euro-Lek exchange rate showed an accelerated decline during the month of July, culminating in a new historic low of 100.49 Lek on July 20.

Meanwhile, in the last two weeks, the course is alternating strong rises and falls in the span of a few days, which may be a signal of a good market malfunction and the possible presence of speculative behavior.