Imported inflationary pressures fell due to lower inflation in Albania’s trading partner countries, low increase or fall in primary commodity prices, and stable exchange rate. On the other hand, economic agents’ expectations for inflation have been well anchored, limiting inflation’s sharp deviation from the Bank of Albania’s target. Against the backdrop of weak inflationary pressures, the Bank of Albania pursued a stimulating monetary policy in 2013. It cut the key interest rate four times during the year, lowering it from 4.00% to record low 3.00%. In parallel, the Bank of Albania continued to supply the financial market with the necessary liquidity. So, in addition to the standard instrument – the 7-day reverse purchase agreement – longer-term instruments have been used to better adapt to the needs of the banking system for liquidity. The easing monetary policy was further reinforced by unconventional measures. The aggressive key interest rate cut was accompanied by the publication of the future monetary policy direction. This type of communication is considered by central banks as a monetary policy instrument, in the context of interest rates ranging close to minimum values. It aimed and was successful in orienting financial market expectations, and helped reduce the interest rates even further in the financial market. Monetary policy signals were transmitted quickly and interest rates dropped across all market segments. Overall, the monetary policy implemented by the Bank of Albania proved successful in containing the downward trend of inflation and in anchoring inflation expectations, hence contributing to maintaining monetary stability.

Durmuş Yılmaz: Developments in Mediterranean countries’ banking sectors and implications for financial stability Speech by Mr Durmus Yılmaz, Governor of the Central Bank of the Republic of Turkey, at the Euro-Mediterranean High Level Meeting, Alexandria, 26 November 2008. *  *  *  Good afternoon. I would like to take this opportunity to thank the European Central Bank for their kindly invitation and the Bank of Egypt for hosting the Fifth Euro-Mediterranean High Level Meeting here in Alexandria. Since the beginning of the Barcelona process in November 1995, Turkey has been an enthusiastic partner of the Euro Mediterranean project. Throughout this process Turkey has collaborated on various macroeconomic issues and initiatives. Recent global financial developments have proved that cooperation at the regional level as well as global level has become more important than ever to overcome international financial challenges. It is our joint responsibility as respective individual countries to contribute to the stability in financial sectors and build up a better international financial system. Distinguished Guests, The worsening expectations of global growth, problems surfaced in financial institutions in developed countries, and deterioration of global credit conditions have all led to a sharp spike in risk perceptions. De-leveraging process in the developed countries has caused risk indicators of emerging markets to deteriorate significantly. For example, EMBI+ spreads have increased markedly since September reaching almost 900 basis points in late October, before declining to 700 basis points on November 25.