TIRANA, May 3 (Reuters) - Albania’s central bank kept its key interest rate on hold at 1.25 percent on Wednesday and again signalled borrowing costs would stay low through 2017 to boost lending and stimulate the economy.
The bank, which has brought the rate down from 6.25 percent at the end of 2008, also left unchanged the 0.25 percent one-day deposit rates and 2.25 percent one-day lending rate, central bank governor Gent Sejko told a news conference.
Sejko added monetary policy “will keep being on the easing side over the medium term” and “the intensity of stimulus will not decrease ahead of the first quarter of 2018”.
“This policy secures the necessary stimulus to spur economic activity and the return of inflation to target,” Sejko said.
In the first quarter of 2016, the annual inflation rate rose to 2.4 percent, he added, as the prices of food and fuel went up. It was expected to be around 2.3 percent in 2017 and “rise even more towards its goal of 3 percent next year”, Sejko said.
“Inflation’s rising trend is backed by the improvement of economic activity, the fuller usage of productive capacities, rising tendency of prices in world markets and the better anchoring of inflationary expectations,” Sejko said.
A stimulative monetary policy, Sejko again told the government, was not a replacement for much-needed structural reforms meant “improve the business climate and step up the efficiency and expansion of the country’s productive capacity”.
The bank’s board believed the economy’s cyclical improvement would continue in the medium term, Sejko said. The board forecast the economy would grow as internal demand strengthened and the world economy improved. Albania sees growth of 3.7 percent in 2017. (Reporting By Benet Koleka, editing by Larry King)