likewise, changes in market expectations about the future course of their policies have a high impact on financial market volatility. furthermore, the region ’ s economies are small and open economies, whose main trading and economic partner is the euro area. in addition, the banking systems in our countries are dominated by eu - based banking groups. so, even though the fed and the ecb ’ s monetary policy decisions affect their domestic economies and financial systems, they might have a delayed, but probably longer lasting effect on our economies. 2 / 4 bis central bankers'speeches depending on their intensity, both the trading and banking channels might affect our monetary policy stance and our monetary policy decisions. given our exposure to the dollar and the euro, the ecb monetary policy stance is more relevant to our economy. in other words, it has a stronger and more direct impact on our monetary conditions and our financial systems. let me take albania as an example, whose main trading partners are eu countries : roughly three quarters of our trade is directed to eurozone countries. over 60 % of fdis originate from the eu. the euro is the main foreign currency in our financial system – more than 4 / 5th of foreign currency assets and liabilities are in the common currency. furthermore, studies indicate an effective basket of currencies in albania would comprise roughly 75 – 80 % euro, and the rest would be usd or currencies pegged to it. all these indicators mean we are much more exposed to the policy stance across the euro area, while the policy stance of the fed affects us only indirectly. at this point, a presumed tightening of the ecb monetary policy : would increase foreign currency lending costs in our economy, i. e. tightening financial conditions ; if not followed by our monetary policy, would cause internal portfolio - shifts and depreciation pressures on the exchange rate ; would not result in major capital outflows, as we did not benefit much capital inflows from the extraordinary expansionary policy pursued by the ecb ; on the other hand, a tightening of the fed monetary policy would not affect albania directly, apart from the usual negative implications it might have on oil and commodity prices. however, i have to state out that our monetary policy would benefit from a predictable monetary policy stance of the ecb in the near future. a predictable stance of the monetary policy in the eurozone enhances the effectiveness of our monetary policy. a wider interest rate differential might lead to appreciation pressures on the exchange rate,

gent sejko : monetary policy of the countries of the region between us federal reserves and european central bank speech by mr gent sejko, governor of the bank of albania, at the becici summit of the countries of the region on " regional financial stability in a new global environment ", becici, montenegro, 16 june 2017. * * * dear mr. chairman, dear colleagues, i would like to start by thanking the organizers for this invitation. as usual, i find it highly useful to share, among colleagues, opinions on common challenges. the title of the panel suggests our monetary policy stances are somehow shaped by the ecb and the fed monetary policy paths. though far from being the full picture, this is true, at some extent. the monetary policies of both these central banks are highly relevant to us. they affect external conditions and they could dictate the directions, the speed and the price of financial flows. furthermore, for countries with a dollarized or euroized financial system, they might also affect domestic credit, financial conditions, balance sheets, as well as exchange rates. so, this brings us to the following questions. where does our monetary policy sit at the current situation? what challenges do we face? and, how do we respond to the shifting of these external monetary policies? i am quite confident these issues will be broadly covered during this event. now let me make a few remarks, regarding the monetary policy of the bank of albania vis - a - vis that of the ecb or the fed. the boa has pursued an expansionary monetary policy, which has been both supported and facilitated by the monetary policy stance of the ecb. during the past four years, the bank of albania has been engaged in an extensive course of monetary accommodation. in the presence of weak cyclical developments and low inflationary pressures, we have decreased our policy rate to a historical minimum of 1. 25 %. furthermore : we have increased our liquidity injections in the banking system ; we have adopted negative rates for required reserves in euro, in line with the policy of negative deposit interest rates in the euro area ; we have been engaged in a clear and transparent forward guidance, announcing our preference for accommodative policy in line with our inflation target ; however, unlike the fed and the ecb, and similarly to other central banks in the region, we have not activated unconventional monetary policy tools. this is because the monetary policy accommodation pursued by the