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The basic interest rate does not change, Sejko: The drop in inflation has exceeded our expectations

2024-03-21 09:38:59Biznes SHKRUAR NGA REDAKSIA VOX

The basic interest rate does not change, Sejko: The drop in inflation has

The drop in inflation to the level of 2.6% in February seems to have surprised even the Bank of Albania.

The Supervisory Council decided yesterday to keep the basic interest rate at the level of 3.25%, while after the meeting the Governor, Gent Sejko, said that the economic and financial balances of the country have improved, while inflation has decreased even faster than the bank's expectations. central.

However, the Governor emphasized that the drop in inflation has come mainly from abroad, while internal inflationary pressures continue to be stable.

"In macroeconomic terms, the drop in inflation was influenced by the reduction in imported inflation. In particular, the rapid decline in food inflation reflected a regional and European phenomenon, dictated by the increase in the supply of these products.

Based on current information, the inflationary effects of this shock will continue to be present for several months to come. On the other hand, although decreasing, domestic inflationary pressures are more stable.

Core net inflation – the indicator, which avoids the impact of more volatile basket price movements and, as such, is a better gauge of medium-term inflationary pressures – averaged around 3.3%, maintaining a rate of same as last quarter.

This trend suggests that internal inflationary pressures continue to remain relatively high, as a result of solid demand for goods and services and pressures coming from the labor market," said Sejko.

According to him, the economic activity in the country has continued to grow, fueled by the expansion of consumption and private investments, by the increase in the export of services, as well as by the acceleration of the pace of realization of public expenditures. Their expansion has been supported by the increase in the disposable income of families, by the sound financial balances of businesses, by the still stimulating financial environment, as well as by positive expectations for the future.

The expansion of employment and wages has continued to support consumption growth, but, on the other hand, it also keeps domestic pressures on inflation high.

The update of the forecasts of the Bank of Albania suggests stabilization of inflation around our target during 2024 and beyond.

The governor said that economic growth will continue to find support in the financial health of the private sector, in the positive dynamics of the labor market, as well as in a stable financial environment. It will be driven by the growth of family consumption, investments and tourism.

"The pace of economic growth is expected to be somewhat slower during the current year, but it is expected to accelerate in the following period, staying in line with the potential of the economy.

On the other hand, inflation is expected to fluctuate around the target during the following period. This forecast factors in our expectations for a more balanced development of demand and supply in the economy, for the stabilization of the prices of food products in the domestic market, as well as for the normalization of inflation in the foreign environment. At the same time, the analysis update suggests that the balance of risks on inflation performance is neutral. In particular, the possible intensification of geopolitical tensions could lead to higher inflation, while the further decline in food prices in the domestic and foreign markets could bring lower inflation levels,” he said.

In the orientations for the future, the Supervisory Council emphasized that future monetary policy decisions will be conditioned by new information and will always be oriented towards respecting the objective of price stability, but also consistent with the direction of fiscal policy and the progress of exchange rate.


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