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The governor of the Bank of Albania, Gent Sejko, said that the foreign exchange rate is normalizing, while emphasizing that it will remain subject to fluctuations in the short term.
According to Governor Gent Sejko, the economy will continue to grow during the following period while inflation will return to the target around the middle of 2024.
Likewise, Sejko said that the Supervisory Council of the Bank of Albania decided to keep the basic interest rate unchanged, at the level of 3.00%; keep the one-day loan interest rate unchanged at 4.00% and keep the one-day deposit interest rate unchanged at 2.00%.
"After a rapid strengthening in the period May - July, the exchange rate of the lek has stabilized in the period August - September, finding a new balance around the current levels. This trend suggests that while the improvement of the foreign balances of the Albanian economy dictates a behavior towards the strengthening of the lek in the medium and long term, the foreign exchange market has been and will remain subject to short-term fluctuations. For this reason, all operators of the foreign exchange market must be careful in their activity, avoiding taking unnecessary exposures to exchange rate risk.
Update forecasts leave our expectations for the future unchanged.
Baseline scenario projections suggest that the Albanian economy will continue to grow over the next period, while inflation will return to the target around mid-2024. In the short term, a more moderate rate of economic growth is expected to bring a more stable performance balanced demand and supply 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 of 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.
Based on the above, the Supervisory Council of the Bank of Albania decided:
to keep the basic interest rate unchanged, at the level of 3.00%;
to keep the one-day loan interest rate unchanged, at the level of 4.00%;
to keep the one-day deposit interest rate unchanged at 2.00%.
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 consolidating direction, current and expected, of the fiscal policy as well as with the strengthening direction followed by the course of the exchange rate during 2023.
However, the Supervisory Council considers that high inflationary pressures from the domestic economy remain a risk factor for price stability in the country. In this dispute, he emphasizes that he remains ready to continue the process of normalizing the stance of monetary policy, if this measure is considered necessary to guarantee price stability", said Governor Sejko .
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