The supervisory board of Albania’s central bank decided on February 26 to cut the base interest rate by 0.25pps to a new historic low of 2.75% after a similar cut in December, the bank said in a statement on its website. The monetary easing reflects the bank’s expectations for weak inflationary pressures in the mid-term period that will enable meeting the inflation target while promoting aggregate demand.
The bank expects the economy to continue growing below its potential and low inflationary pressures coming from the foreign sector are is expected to be reflected in lower levels of inflation.
However, the central bank expects gradual economic recovery in 2014 thanks to rising external demand as well as improvement of private sector demand. In central bankers’ view the repayment of arrears to the private sector would improve the liquidity in the sector and facilitate the banks' balance sheets. In addition, the accumulation of financial savings and facilitator of policy stimulus is expected to materialise in a better performance of private consumption.
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