The Bank of Albania raised its base interest rate by 0.25 percentage points last week, pushing it to 3.25%.<\/p>\n
This marked the sixth increase in the base rate since March 2022 when the central bank initiated a policy of tightening to combat inflation. Back in early 2022, the rate stood at a historic low of 0.5%.<\/p>\n
Gent Sejko, the Governor of the Bank of Albania, pointed out that the persistent inflationary pressures from the domestic economy continue to pose a significant risk to price stability in the country. The balance of risks related to inflation has shifted towards the upside.<\/p>\n
Expectations are that interest rate hikes will continue. During a recent visit, the International Monetary Fund (IMF) recommended that the Bank of Albania raise the base interest rate to 4.5% from the current 3% to achieve the 3% inflation target.<\/p>\n
The IMF suggested that given the growing internal inflationary pressures, a more flexible approach is required to make decisions regarding rate hikes in a meeting-by-meeting fashion.<\/p>\n
The Bank of Albania had previously halted the base rate increase in March after it reached 3%, as inflation had started to decline. However, challenges in the domestic production sector seem to be placing upward pressure on prices once again. Therefore, according to the IMF, it is essential to move interest rates upwards.<\/p>\n
The Bank of Albania explained that the rapid strengthening of the Albanian lek in the past year resulted from a consistent surplus of currency in the domestic market. This surplus was a consequence of the rapid and robust growth of tourism, foreign direct investments, and remittances.<\/p>\n
This situation allowed the central bank to maintain a lower base interest rate, which, in turn, provided the Albanian economy with lower financing costs and eased the financial burden on borrowers.<\/p>\n
Inflation, which had been on a declining trend until May 2023, started to rise again in September, reaching 4.1% from the 4% level seen in August.<\/p>\n","protected":false},"excerpt":{"rendered":"
The Bank of Albania raised its base interest rate by 0.25 percentage points last week, pushing it to 3.25%. This marked the sixth increase in the base rate since March 2022 when the central bank initiated a policy of tightening to combat inflation. Back in early 2022, the rate stood at a historic low of […]<\/p>\n","protected":false},"author":24,"featured_media":9889,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[153],"tags":[270,1679,5050,823,2970,3701,5049,4135,243,151],"acf":[],"yoast_head":"\n