has thus far remained contained, even though the labour market has clearly been at its tightest for a generation. relative wages are showing noticeable variation across industries and regions, as would be expected given the events in the economy. but overall growth of wages, as measured by all the formal statistics at least, has to date been pretty well controlled. furthermore, if the recent signs of moderation in the demand for labour continue, which could be expected if overall demand remains on a slower track, that should help to contain any over - exuberance in wage setting. so i think that our chances of keeping inflation low over the medium term are good. this outlook does involve a period of significantly slower growth in demand in australia than we have seen over the period up to the end of 2007. the bank has been candid about that. but controlling inflation has always involved being prepared to slow demand, for a while, when needed. not taking adequate steps to that end would have costs. one is that were we to see inflation become established permanently at higher levels, then over time the whole structure of nominal interest rates would reflect that new reality. the mean interest rate would rise. in that world, the interest rates we see now would not look unusually high. they, or even higher rates, would look pretty common. that is what happened in the 1980s, as a result of the fact that we did not control inflation in the 1970s and early 1980s as well as we should have. needless to say, it is that world that we are seeking to avoid. by the same token, there will be a continued pay - off to control of inflation. a stable currency is one of the foundations on which a well - functioning modern economy rests. it is a prerequisite for sustaining growth in living standards. on the interest rate front, moreover, containing and reducing inflation over time will mean that we should be able, at some point, to look back to the current period as one of higher - than - normal interest rates. interest rates, cpi inflation excluding interest charges prior to the september quarter 1998 and adjusted for the tax changes of 1999 - 2000. unlike many other prices in the economy, do not always rise. provided inflation is successfully controlled, interest rates go up and down around a fairly stable mean. conclusion i have dwelt today on challenges facing macroeconomic policies and particularly monetary policies, both abroad and at home. these challenges look more difficult than they have been for a while. of course,

ardian fullani : recent economic and monetary developments in albania speech by mr ardian fullani, governor of the bank of albania, at the press conference on the monetary policy decision of the bank of albania supervisory council, tirana, 1 march 2012. * * * today, on 29 february 2012, the supervisory council of the bank of albania reviewed and approved the monthly monetary policy report. based on the analyses of albania ’ s latest economic and monetary developments and following discussions on their performance outlook, the supervisory council of the bank of albania decided to keep the key interest rate unchanged at 4. 50 %. the supervisory council deemed that this decision provides the appropriate monetary conditions to meet the inflation target over the medium term. moreover, it provides the necessary monetary stimulus to the economy in albania. ( let me now proceed with an overview of economic developments and main issues that were discussed at today ’ s meeting ). * * * annual inflation rate was 1. 6 % in january, slightly down by 0. 1 percentage points compared with the previous month. the annual inflation rates have been pursuing a downward trend since the second half of 2011, reflecting the mitigation of inflationary pressures from the supply side : cancelling out of effects from administered price rise ; increase of domestic agricultural production ; and slowdown of imported inflation. the downward annual inflation in january reflected the further decrease of imported inflation from the external sector of the economy, materialised in the lower contribution of the prices of processed goods and foods. prices of unprocessed foods continued to contribute to downward annual inflation, while the contribution of other categories was relatively stable. inflationary pressures from the demand side remain low and are conditioned by the continued negative output gap and lack of cost - related pressures on the economy. moreover, low increase of consumer prices has reflected economic agents ’ expectations on inflation. according to instat data, albania ’ s economy growth rates improved over the third quarter of 2011, posting an annual growth of 2. 6 % over this quarter. on the production side, growth was supported by branches of the industry sector and services. on the demand side, economic growth continues to be driven by foreign demand, while domestic demand remains sluggish. a similar growth model is assessed to have taken place in the fourth quarter of 2011. based on the analysis of aggregate demand components, the bank of albania judges that foreign demand was the main driver of demand increase during 2011. although not at the levels of previous year, exports continue to grow. latest