On November 6th, 2024, the Bank of Albania announced a reduction in the country’s base interest rate in LEK, lowering it by 0.5 percentage points to 2.75%. This decision, made by the Supervisory Council, reflects the central bank’s ongoing effort to maintain economic stability, while considering the most recent inflationary and economic growth data. Gent Sejko, the Governor of the Bank of Albania, shared that this move is part of a broader monetary strategy aimed at managing inflation and supporting sustainable economic growth.

Why does it matter: Through interest rate cuts, the Bank of Albania stimulates borrowing and investment, which can help to cushion the economy against downturns. For Albania, this decision reflects a proactive approach to keeping price levels in check and ensuring that economic growth is not hindered by restrictive monetary conditions.

The reduction in the base interest rate comes as a response to recent economic data and projections. Governor Sejko explained that the Supervisory Council’s decision aims to counterbalance short-term supply shocks that may impact inflation in the near future. By creating more favorable monetary conditions, the central bank hopes to provide a cushion against external economic pressures that might otherwise destabilize prices.

Sejko noted that inflation is gradually aligning with the Bank of Albania’s medium-term target of 3%. This adjustment in rates aims to maintain this trajectory, ensuring that inflation does not veer too far from the target while encouraging consumer and business activity. The central bank’s decision also aligns with broader fiscal policy efforts and the behavior of exchange rates, providing a coordinated approach to economic stability.

Sejko emphasized that future monetary policy decisions will be data-driven, with the Bank of Albania carefully monitoring new information and adjusting its policies accordingly. Particular attention will be given to internal inflationary pressures, ensuring that the bank remains responsive to economic changes. The council’s decision reflects a readiness to react symmetrically to fluctuations in inflation, whether prices rise or fall.