May 2, 2018 / 5:42 PM / 3 months ago

Albanian central bank holds rate, extends stimulus period

TIRANA, May 2 (Reuters) - Albania’s central bank held its benchmark rate at its lowest-ever level of 1.25 percent on Wednesday and said its monetary stimulus would remain strong until April 2019.

Speaking after the bank’s supervisory board meeting, bank governor Gent Sejko said it had also held the one-day deposit and lending rates at 0.25 percent and 2.25 percent respectively.

Sejko said reaching the bank’s annual inflation target of three percent would require a “more helpful” policy in the medium term, and extended its provision of stimulus by six months until the second quarter of 2019.

“Based on the available information, the Supervisory Board thinks the intensity of monetary stimulus will not go down ahead of the second quarter of 2019,” Sejko told reporters.

Inflation recorded an average annual rate of 1.9 percent in the first quarter of 2018, ticking up from the previous quarter and mainly reflecting higher rents.

Sejko saw inflation reaching its three percent target in 2019.

In January-March of 2018, the economy had grown at the same rate it did in the last quarter of 2017, at around 3.4 percent.

He said the rise of inflation came from the expansion of demand and internal inflationary pressures, but it was reined in by lower inflation levels from trading partners and the strengthening of the local lek currency.

The lek was trading at 127.92 to the euro on Wednesday, according to the central bank’s fixing, gaining 0.82 percent from the previous day. The lek stood at 137.28 lek to the euro at end-2015 and at 132.95 to the euro at end-2017.

Factors behind the strengthening of the lek were fundamentals like a bigger supply of euros as a result of an improved current accounts deficit, higher levels of foreign direct investments and lower risks in the domestic financial market, Sejko said.

“On the other hand, the relatively rapid strengthening of the lek over the last two months reflects the action of specific players in the foreign exchange market,” Sejko said.

“This is not linked either to the direct effects or the goals of our strategy to stimulate the use of the national currency. As such, it is expected and evaluated to be short-lived,” Sejko said. (Reporting By Benet Koleka, Editing by William Maclean)

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