Let me now present another important issue in my speech, which has to do with one of the main legal responsibilities of the Bank of Albania, i.e., consumer price stability. 2. Inflation and monetary policy  Consumer goods price inflation over 2006 was generally within the Bank of Albania’s targeted range of 2 to 3 percent. Year-end recorded a 2.5 percent annual inflation rate. It was almost similar to the 2005 annual inflation rate of 2.4 percent. Inflationary pressures, though moderate, have been increasing over 2006. The average annual inflation rate amounted to  BIS Review 80/2007  3  2.7 percent during the second six-month period of the year, from 2.0 percent it was in the first half of the year. In general, the annual average inflation steadiness during the recent years, speaks for the inflation rate stability, in spite of the fluctuations in time and size of the factors that have conditioned the consumer price performance. Developments on the demand and supply side of the economy have been balanced, without creating premises for inflationary pressures. The fiscal policy has observed the programmed indicators on annual basis, stabilizing the impact of the public sector component on the aggregate demand. Also, the monetary policy has controlled liquidity conditions and interest rate developments, and has attended the exchange rate performance, monitoring through them the economic activity financial stimuli.

Likewise, Asia should ensure it has its own ‘carbon-fibre curtain’ of policy adaptability and flexibility to manage destabilising movements in the financial system. Despite the inevitable diversification of de facto reserve currencies, the dollar will remain a significant force to facilitate global trade and cross-border capital flows. Thus, it is of primary importance for Asia, in particular the emerging markets, to ensure that economic fundamentals are strong and financial markets are resilient with adequate buffers. At the same time, we need to continuously improve the necessary infrastructure for corporates, businesses and financial institutions to transact in a multi-currency environment. Currently, cross-border trade within the ASEAN region are transacted and settled mostly in dollars despite almost half of ASEAN trade being intra-regional. It makes economic and business sense, that transacting in local currencies would enhance the efficiency of trade and investments, with strong probability of reducing the cost of doing business. In an environment of volatile market conditions, businesses will have more options to choose the currency to transact, providing flexibility and insulation from exogenous shocks. Greater usage of local currencies would be an impetus for the development of the region’s financial markets, consistent with ASEAN’s collective vision for an integrated cross-currency market. Malaysia has been forward-looking in preparing for the inevitability of a multi-currency market: i. We have diversified our international reserves into emerging market currencies in early 2000, including into renminbi assets. We were confident in the diversification benefits given the strength and sustainability of China and emerging markets’ economic growth.