Albania’s central bank kept its benchmark rate unchanged on Wednesday at a record low 1 percent, saying it would not act to normalise policy before April and might even cut borrowing costs further should growth risks materialise.
The bank’s supervisory board also kept its one-day deposit and lending rates unchanged respectively at 0.1 percent and 1.9 percent, and governor Gent Sejko said inflation would stay below target for longer than expected and economic growth would probably slow.
The bank has cut the benchmark rate from 6.5 percent since the end of 2008 to spur lending and growth after the economy was hurt by the global financial and economic crisis.
“This scenario foresees that the normalisation of monetary policy will be very gradual and – in every case – will start no earlier than the second quarter of 2020,” Sejko said.
The bank’s annual inflation target of 3 percent would not be hit until the second half of 2021, rather than the first as it had said in May, because of added economic headwinds, he said.
The economy could face dangers from a slowdown in the euro zone. “Deterioration of our base scenario or the manifestation of shocks could require us to ease …policy,” he said, also citing possible exchange rate volatility.
Sejko said the bank expected a slowdown in growth.
Albania’s economy grew 4.1 percent in 2018. The government budgeted for 4.3 percent in 2019, when the International Monetary Fund sees it expanding 3.7 percent.
“The Bank of Albania thinks economic growth will continue to remain in positive territory over the medium term. The fall of electricity output will cause a temporary slowdown to growth during 2019,” Sejko said.
“Later, favourable financing conditions and improved balance sheets of private agents are expected to expand internal demand and use production capacities more fully.”