Saturday, January 28, 2012

Bank of Albania Cuts Interest Rate 25bps to 4.50%

The Bank of Albania cut its main monetary policy interest rate a further 25 basis points to 4.50% from 4.50% previously.  The Bank said: "in the Supervisory Council assessment, inflationary pressures remain controlled over the monetary policy relevant horizon. Moreover, economic agents' expectations on inflation remain anchored to the Bank of Albania's target band. At the conclusion of discussions, the Supervisory Council decided to cut the key interest rate by 0.25 percentage points to 4.50%. This decision serves to comply with the medium-term inflation target and provides the appropriate monetary conditions to stimulate Albania's economic activity."

The Bank of Albania has now cut the interest rate three times (including 25 basis points in October, and December) since it previously raised the interest rate by 25 basis points to 5.25% at its March meeting last year.  Albania reported annual inflation of 1.7% in December, down from 3.1% in August, 4.2% in May, and 4.5% earlier in February last year, and now below the Bank's 3% inflation target.  

The IMF previously estimated Albania's economy would grow 2.7% 2011, while the government had hoped for 5% GDP growth; Albanian economic growth was 2.3% in 2010.  Albania's currency, the Lek (ALL) has weakened by about 3% against the US dollar over the past year; the USDALL exchange rate last traded around 105


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