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The interest rate does not change, Sejko: The current exchange rate will be the new normal

2023-10-04 21:06:46Biznes SHKRUAR NGA REDAKSIA VOX
The interest rate does not change, Sejko: The current exchange rate will be the
The current exchange rate will be the new normal

The Supervisory Council of the Bank of Albania decided today to keep the basic interest rate unchanged at 3%. The governor, Gent Sejko, said that the decision to keep the base rate unchanged again tends to balance the tightening nature of the fiscal policy and the strengthening of the Lek in the foreign exchange rate.

"The Supervisory Council notes that this decision-making helps to create suitable monetary conditions for the return of inflation to the target during the next year. Also, it is consistent with the current and expected consolidating direction of the fiscal policy as well as with the strengthening direction followed by the exchange rate during 2023. However, the Supervisory Council considers that the high inflationary pressures from the domestic economy remain a risk factor for price stability in the country. In this context, he emphasizes that he remains ready to continue the process of normalizing the stance of the monetary policy, if this measure is considered necessary to guarantee price stability , "said Sejko.

Meanwhile, for the Central Bank, the current exchange rate at the level of 105 ALL will be the new normal for the following period as well.

"After the fluctuations, this rate was signaled in the period of August and September, creating a new normality. However, in the short term we may face fluctuations" , said Sejko.

Keeping the base interest rate at 3 percent is good news for Lek borrowers, who will not pay more for their installments. However, the Bank of Albania warns that if inflation will increase, then the monetary policy may be further tightened.

After today's meeting, the Supervisory Council confirmed the projections for a slower growth of the economy during 2023 and for a gradual return of inflation to the target next year.

"The projections of the base scenario suggest that the Albanian economy will continue to grow during the following period, while inflation will return to the target around the middle of 2024. In the short term, a more moderate rate of economic growth is expected to bring a more balanced supply and demand for goods and services, helping to reduce internal inflationary pressures and stabilize prices during the coming year. Furthermore, in the medium term, the rate of economic growth is expected to normalize, in line with the country's production potential. This forecast scenario factors in our expectations for a slow, but still positive performance of the Eurozone economy, expectations for a gradual reduction in inflation in the foreign environment, as well as expectations for a smooth performance of the economy and the Albanian financial market. At the same time, the updated analysis and forecasts suggest a more neutral risk balance profile."it is stated in the statement of the Supervisory Council.


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