ATA News

Central Bank: Eased key interest rate to have positive impact on economy in three directions

TIRANA, July 8 /ATA/ – The Bank of Albania told Albanian Telegraphic Agency (ATA) on Sunday that its decision to ease the monetary policy by reducing the key interest rate by 0.25 percentage points recently will have a positive impact on the economy in three aspects.

According to the central bank, the lower key interest rate will ease financial pressure on borrowers by lowering the cost of loans and the decision will also support steady increase in loan portfolio as an important supporting economic growth.

“Lowering the cost of loans will have direct effect on cutting instalment payments of existing loans and will increase the demand for new loans. Therefore, the decision will further fuel consumption and investment growth, generating more employment for the Albanian economy,” the central bank said.

Secondly – the Bank clarifies – the eased monetary policy decision aligns with the recent European Central Bank’s move to cut interest rate for the single currency Euro. This synchronized move eases pressures on further appreciation of the local currency, as well as it eases inflation pressure.

In a response forwarded to ATA, the Bank also says that the decision to ease the key interest rate aims at prevent any effect of the rapid decline in inflation rate on the expectations of economic agents.

Earlier this week, the Supervisory Council of the Bank of Albania decided to lower the base interest rate to 3.0 percent.

In February 2022, the Bank of Albania began tightening its monetary policy in response to rising inflation, increasing the base rate from 0.5 percent to 3.25 percent, with the most recent hike occurring in November 2023.

Governor Gent Sejko explained in a press conference that the positive economic performance and declining inflation were the primary reasons for this decision.