As we have already underlined, the main problem with regard to lending remains the low business and consumer demand for loans. However, banks’ lending policies appear more conservative, as reflected in the relatively tight lending standards. The forecast for subdued consumer prices and weak economic growth in the period ahead motivated the further easing of the monetary policy at the outset of the current year. In January, the Supervisory Council of the Bank of Albania cut the key interest rate by 0.25 percentage points to 3.75%. Through anchoring inflation expectations, easing liquidity pressures and cutting the short-term interest rates, the monetary policy has aimed at reducing the costs of long-term lending to the economy and supporting the growth of credit, consumption and investments in Albania. The Bank of Albania's easing policy did not reflect uniformly across the financial market segments. The latest key interest rate cut was reflected swiftly and completely both in the interbank market and the primary market of government securities. On the other hand, it was only partially transmitted to the deposits market and even less to the credit market. These developments illustrate the fact that, in the presence of added risk premiums and structural changes of behaviour in the financial market and the real economy, the effectiveness of monetary policy action is lower. Based on these reasons, the Bank of Albania decided to support its stimulating monetary policy with a number of changes on the easing side of the supervisory, regulatory and macroprudential framework.

Ardian Fullani: Overview of Albania’s latest economic and financial developments Speech by Mr Ardian Fullani, Governor of the Bank of Albania, on the Monetary Policy Decision-Making of the Bank of Albania’s Supervisory Council, Tirana, 30 April 2013. *  *  *  Today, on 30 April 2013, the Supervisory Council of the Bank of Albania reviewed and approved the quarterly Monetary Policy Report. Based on the most recent monetary and economic developments in Albania, and following the discussions on their outlook, the Supervisory Council of the Bank of Albania decided to keep the key interest rate unchanged, at 3.75%. The Supervisory Council deems that the current monetary conditions are adequate to meet Bank of Albania's inflation target in the medium term. The present interest rates and liquidity situation in the economy provide simultaneously the necessary monetary stimulus to boost domestic demand. Let me now proceed with an overview of the economic developments and key issues discussed at today’s meeting. *** According to INSTAT data, economic activity in Albania increased 1.6% in 2012. The Albanian economy showed signs of weakness during the past year, reflecting an overall uncertainty in the internal and external environment. Nonetheless, against the backdrop of unfavourable developments, the main indicators of domestic and external balances remained within healthy parameters. During this period, inflation ranged within the Bank of Albania target band and indicators of banking system soundness improved. Maintaining these balances provides the right macroeconomic premises for sustainable and long-term growth.