Against this backdrop, the Bank of Albania remains confident that the return of the economy to its potential and the fuller utilisation of production capacities will be accompanied by faster increase in wages and productions costs. Inflation is, therefore, expected to return to the target within 2019. This forecast is conditional to maintaining an accommodative monetary policy stance in the quarters ahead, and takes into account the continuation of the fiscal consolidation process. The continuation of fiscal consolidation has enabled a better transmission of the monetary stimulus to the economy and has helped reducing fiscal weaknesses and increasing the resilience of the public sector against future challenges. The coordination of the monetary policy with the fiscal policy is vital for strengthening the macroeconomic stability and ensuring sustainable growth. We deem that the current macroeconomic policy mix is adequate. On one hand, it maintains a stimulating resultant trend of main economic policies and, on the other hand, it addresses the weaknesses deriving from the relatively high level of public debt. ***  Honourable Committee members, In response to your recommendation for on-going improvement of the monetary policy transmission mechanism, let me share with your some obstacles we have identified as well as our matrix with actions for addressing them. 2.2. Monetary policy and its transmission mechanism In our judgment, the pass-through of the monetary policy effect to financial markets and the economy, in other words the transmission mechanism, continues to suffer from three structural obstacles.

This could further weaken demand, negatively affect growth and inflationary convergence, and require a stronger than expected monetary impulse. On the other hand, the picture of health risks looks more balanced than it did a few months ago. Cumulative experience, the prevention measures and the strengthening of the healthcare systems reduce the probability of repeating the worst episodes of previous months in the event of a resurgence of the virus. Thus, it is possible that the deconfinements will proceed a little faster, allowing activity and employment to rebound sooner, especially if a vaccine is developed more rapidly. In such a case, inflationary convergence would require a somewhat less prolonged monetary impulse. The possibility of more negative risk scenarios, especially associated with the economic wounds inflicted by the pandemic, is still present. The various measures have made it possible to maintain credit flowing in line with working and investment capital needs, breaking the pro-cyclical relationship of credit. Going forward the materialization of investments, productive adjustments in sectors that have been forced to make profound changes in their operation, and increases in activity levels, will require that this financing continue to be available. Therefore, it is essential to ensure a sustained flow of credit, ensuring that the financial system does not see its levels of capitalization and liquidity deteriorate, whether due to regulatory changes and/or a sharper deterioration in the repayment capacity of households and businesses.