In-depth knowledge of the banking sector and the various financial institutions is extremely useful when it comes to reacting and making decisions during periods of turmoil in the credit and money markets. Since the beginning of the crisis, central banks have had to judge almost instantly the appropriateness of injecting liquidity in different forms and for different timeframes. It is therefore particularly important to be able to assess the quality of the market participants and  BIS Review 130/2008  5  the reality of their needs. More generally, it is crucial during periods of crisis to distinguish between liquidity problems and solvency problems. Therefore it is a considerable advantage to have all the cards in one’s hands. As regards the infrastructure of supervision, it seems clear to me that simple, robust and pragmatic plans have shown their efficiency compared to more sophisticated and complex schemes. During the last few months, at no time have I felt that our organisation was deficient or was preventing me from obtaining adequate information needed to make the necessary decisions. We have managed to deal with all situations, and I have observed the efficiency of our supervision system on a daily basis. Nonetheless, it is clear that an in-depth and comprehensive debate on the optimum structure of financial supervision in Europe is necessary. Structures have to adapt to the rapid integration of the markets. I firmly support the Lamfalussy process and I am convinced that the current efforts to improve and develop this process deserve our full attention.

Global financial markets are improving, but they are still fairly sensitive to fiscal perspectives of certain economies and to tensions in the Euro area. Additionally, these markets show relatively little interest in South Eastern Europe countries, including Albania. Overall, world economic growth is expected to remain high for the upcoming period as well, contributing also to the triggering of inflationary pressures and drawing more attention of monetary authorities to macroeconomic balances. Domestic economic and monetary developments continued to generate an environment of contained inflationary pressures. Annual inflation for January 2011 was 3.3%, dropping by 0.1 p.p. compared to December 2010. This decline of inflation in January is totally due to the statistical effect of neutralising the increasing impact of some administered prices on inflation. On the other hand, food items and oil prices increased significantly, as a result of rising prices in world markets. These factors contributed by about 80% to the formation of the inflation figure. Increased agricultural products prices affected mostly the low-income segments of the Albanian society. As stated above, domestic inflationary pressures are characterised by short-term supply shocks, while the generated inflation by domestic demand is low, as reflected in the relatively stable situation of core inflation. This performance is conditioned by the existence of free capacities in the Albanian economy as well as contained monetary expansion and anchored inflationary expectations of consumers, businesses and agents in the financial market. The Bank of Albania deems that, in general terms, these factors will continue to be present during 2011.