November 6, 2019 / 5:27 PM / 6 days ago

Albanian central bank holds rates, could cut further

TIRANA, Nov 6 (Reuters) - Albania’s Central Bank held its benchmark rate at the record low of 1% on Wednesday, saying it would not start normalising policy until at least April and might even ease the rate further to protect the economy from shocks.

Central Bank Governor Gent Sejko told reporters its Supervisory Board had also left unchanged the one-day deposit and lending rates at 0.1% and 1.9% respectively.

Explaining the bank’s base scenario, Sejko said the bank planned to normalise monetary policy only very gradually and did not intend to start tightening before the second quarter of 2020.

Sejko has been speaking for months about normalising policy. The central bank has lowered its benchmark rate from 6.5% in 2008 to its current historic low to spur lending and boost an economy hit by the global financial and economic crisis. However, he has also promised stimulus if needed.

A slowdown in the euro zone, political strife stemming from the opposition’s walkout from parliament and unexpected shocks from the exchange rate could throw the economy off balance, Sejko said.

“The Supervisory Board thinks any manifestation of those shocks might require an easing of monetary policy,” he said.

Average annual inflation was 1.4% in the third quarter, the same level recorded in the second quarter. Inflation is expected to hit the bank’s target of 3% annually in the second half of 2021, Sejko said.

“Looking at the future, the Bank of Albania thinks wage and production cost increases as well as the stabilisation of the exchange rate will be producing the conditions to help inflation return gradually to its target,” Sejko said.

Economic growth in the second half of 2019 is expected to be similar to the 2.3% growth of the second quarter, Sejko added, reflecting a fall in electricity output, the shutting down of betting firms and the completion of a gas pipeline.

Finance Minister Anila Denaj said on Monday the Balkan nation seeking to join the European Union now expects growth of 3.4% at end-2019, down from its budgeted forecast of 4.3%.

“But it will accelerate in the next two years,” Sejko said. (Reporting by Benet Koleka; Editing by Kirsten Donovan)

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