In fact core inflation is expected to be slightly above our inflation target by the end of the forecast horizon at 2.3 per cent. Energy price inflation remained extremely elevated at 40.8 per cent in September and it continues to be the dominant component of overall inflation. Marketbased indicators suggest that, in the near term, oil prices are likely to moderate, while wholesale gas prices will stay extraordinarily high. The relatively high import share of gas needed for the EU27 energy consumption, will create extensive challenges in the coming winter months, especially, in countries with gas-intensive industrial sectors. Food price inflation also rose in September (to 11.8 per cent), reflecting higher input costs related to energy, disruptions of trade in food commodities, and adverse weather conditions. While supply bottlenecks have been easing, these continue to gradually feed through to consumer prices and are putting further upward pressure on inflation, as is recovering demand in the services sector. The depreciation of the euro has also contributed to the rising inflationary pressures, together with the aforementioned supply and demand factors. Monetary policy The ECB's primary objective is price stability, which is defined as keeping inflation at 2% over the medium term. In response to these developments, in our September monetary policy meeting, the Governing Council of the ECB decided to raise policy rates by 75 basis points. This significant step frontloads the transition to normalise monetary policy towards levels that will enable the timely return of inflation to our two per cent medium-term target.

These highlights reflect, inter alia, the macroeconomic policies pursued over the course of this period. Monetary and fiscal policies have, in a concerted manner, aimed at fuelling aggregate demand and economic growth, ensuring at the same time the preservation of macroeconomic balances. July’s state budget revision put emphasis on the measures required to be taken in view of maintaining medium and long-term fiscal sustainability, hence implying lower budget deficit and lesser impact of fiscal stimulus on aggregate demand in the short run. This revision paved the way for pursuing an easier monetary policy. The key interest rate lowered by 0.25 p.p., hence yielding the most stimulating monetary conditions during the last decade. Nevertheless, complex challenges remain for the Albanian economy and the economic agents. Economic growth rate, albeit positive, seems insufficient to yield improvements in the labour market and to lower unemployment. In addition, the sustainability of economic growth remains frail in the short run. Its reliance on foreign demand and export growth may be insufficient against a background of a non-consolidated global economic outlook. The waning of fiscal stimulus also requires greater contribution of the private sector to economic growth, hence bringing consumer and business behaviour to the forefront and accentuating the role of bank credit to their financing. Setting proper equilibrium between  BIS Review 170/2010  1  short-term stimulus and long-term stability requires courage and diligence from the policy-makers. Ongoing structural reforms remain a priority in the long run.