. competition for deposits therefore remains strong and rates high. it ’ s not just that higher bank funding costs will now be passed on to new borrowers, adding headwinds to the economic recovery, though that is certainly a factor. indeed, the lower policy interest rates set by the ecb since the crisis began have only been partly transmitted to borrowers in ireland and in the other stressed euro area countries ( figure 6 ). ( as is seen by the results of a recursive regression exercise, the pass - through from policy rate to irish residential mortgage svr rates has halved since the start of the crisis – figure 7. ) some of this can be rationalised as reflecting a higher credit risk - premium being charged by the banks, but some is also due to the higher marginal cost of funds. worse still for the health of the banks, and their ability to contribute to the economic recovery, is the fact that they are still coping with the consequences of their marginal cost of funds having delinked so sizably from the ecb policy rate. these consequences arise because of the long - term mortgage contracts the banks made when they assumed that their marginal cost of funds would always remain close to the ( risk - free ) policy rate. suffice it to say that a large block of residential mortgages was granted at interest rates which track the ecb policy rate plus a very low spread. these tracker mortgages, many of which have an average remaining maturity of 15 – 20 years or more, yield less than the marginal cost of funds ( figure 8 which is drawn on the assumption, not strictly valid, that the average spread of the trackers over policy rate was unchanged over time ). in effect, by assuming that their cost of funds would not deviate much from the ecb policy rate, the banks exposed themselves to a very large “ basis risk ”. in principle, they could escape bis central bankers ’ speeches this trap if there were a willing purchaser ( public or private ) with access to funding at a cost that is not contaminated by the sovereign stress. until such a purchaser comes forward, the banks will have to continue to fund this portfolio at a loss, even on performing mortgages, whose effects will spill over onto their customers and their owners ( not least the state ). conclusion irish sovereign spreads may no longer be bloated by redenomination risk, but at 300 basis points at the long - end, they do seem to reflect a

gent sejko : overview of albania ’ s latest monetary and economic developments and outlook speech by mr gent sejko, governor of the bank of albania, on the monetary policy decision of the bank of albania ’ s supervisory council, tirana, 4 march 2015. * * * today, on the 4 of march 2015, the supervisory council of the bank of albania reviewed and approved the interim monetary policy report. after scrutinising the current and expected performance of inflation and other economic indicators, the supervisory council of the bank of albania decided to keep the key interest rate unchanged at 2. 0 %. * * * the domestic and external economic environment has generated low inflationary pressures. according to instat data, annual inflation was 1. 3 % in january, up from the rate registered in december. inflation fluctuations in the last two months have been determined mainly by the volatility in food prices. the fall in food inflation in december and its rise in january were driven by developments in international markets and the performance of domestic production. in parallel, the decline in oil prices has generated downward pressure on inflation. prices of other consumer goods ’ categories did not display any significant change. the rise in inflation in january was in line with our projections ; however, the rate of inflation remains below bank of albania ’ s target. the bank of albania evaluates that inflationary pressures will increase gradually and inflation will return to target within the medium term. however, bank of albania evaluates that inflation will remain below the target for the most of this period. its performance will continue to be determined by the degree of recovery in economic growth, supply - side domestic and external shocks, and economic and financial agents ’ inflation expectations. the albanian economy is assessed to have improved in 2014. according to instat data, the economic activity grew by 1. 4 % during the first nine months of the year. we expect the growth rate to accelerate in the fourth quarter, driven by the strong fiscal stimulus in this period. due to damages caused by floods in the south of the country, our projections on the performance of the economy during 2015 are revised slightly downwards. however, their effect is expected to be temporary and the economy is projected to remain in an upward trend in the medium term. economic growth for 2015 is projected to be higher than that in the previous year. the expansion of economic activity will continue to be driven, to a large extent, by private sector growth. foreign demand is expected to play a small positive