ardian fullani : inflation targeting in practice greeting address by mr ardian fullani, governor of the bank of albania, at the regional seminar on inflation targeting in practice, tirana, 10 october 2005. * * * dear participants, it is a great honour for me to address the opening speech of the regional seminar “ inflation targeting in practice ” organized by the centre of central banking studies in association with the bank of albania. i am delighted to see that the audience has an international composition. at the same time, i would like to take the opportunity to give my cordial thanks to mrs. gill hammond, ccbs deputy director and all speakers accompanying her during the proceedings of this seminar. i would also like to thank the bank of england and in particular the director of the centre of central banking studies, mr mario blejer, an old friend of mine, who continues to give his contribution to the improvement of the albanian image in the world, just like many years ago. this seminar is being organized in a very opportune time for the bank of albania. in less than two months, i shall be once more in front of a very distinguished international audience, to address the opening speech of the open forum on “ pre - conditions for launching inflation targeting in albania ". the object of this forum is to discuss the prime pre - conditions to be met by the bank of albania before launching the implementation of a new monetary policy strategy, with a particular emphasis on albania ’ s membership to the european union in the long - term run. the fact that we have been successful in controlling inflation during the last years holds true. we have managed to attain a general stability and i believe the policy adopted by us has been one of the key factors. another fact which holds true is that, for some time, we have been considering to take another step, attempting a more sophisticated, effective and certainly a more responsible and transparent monetary policy approach. to this aim, we have come to the conclusion that the actual framework of the monetary policy requires the necessity of being further completed and perfected with standard elements, adopted by other countries in the world and where the targeting inflation regime has proven to be successful. we are aware that this is not an effortless initiative to be seized. therefore, i consider that this is a great fortune for the bank of albania to have the possibility, on the verge of discussing the preconditions of adopting this regime, to closely discuss and consult the distinguished guests present in this seminar

price increases and shortages in the used car market. there have been a few other very specific and identifiable supply problems that have driven some other prices to very high levels — the semiconductor shortages that led to auto production slowdowns, for example, and, in some cases, labor shortages or restrictions related to the covid event were associated with trade disruptions. second, if we recognize that much of the excessive inflation we are seeing this year is directly attributable to disruptions that, like the covid event, will end, then monetary policy often can look through those types of disruptions to consider what inflation will be in the future when this episode passes. to get a fix on where inflation is headed, it is helpful to consider measures of inflation that try to filter out the most unusual and presumably transitory price increases that may be driving headline inflation. the federal reserve bank of dallas ’ s trimmed mean measure of inflation systematically removes prices that are increasing or decreasing at abnormally large rates, in order to get some perspective on underlying inflation pressures. for the 12 months through august, the dallas trimmed mean inflation was an even 2 percent. of course, while this metric may provide a better indicator of future pce ( personal consumption expenditures ) - 7inflation, i do not mean to suggest that this is necessarily a better reading on current inflation — consumers and businesses have to pay for the goods whose prices have risen sharply, and those increases are being felt. that brings us to the third reason that i do not think the fomc is behind the curve : anchored inflation expectations. we monitor longer - term expectations of future inflation because we believe they influence changes in actual inflation over the medium term. in fact, our new framework recognizes that stable, well - anchored inflation expectations help return inflation to 2 percent when it is running high, as it is now, as well as when it has fallen somewhat below that goal, as it often does during a recession. so far, market - based measures of longer - term inflation expectations, as well as surveys of professional forecasters, have increased only moderately this year, moves that more or less reversed declines in those expectations over the previous half - dozen years. measuring expectations is an inexact science, but smoothing through the ups and downs in expectations in recent years leaves these indicators within a range that has been consistent with inflation near our 2 percent goal. how long is too long? going forward, the question is not only whether inflation will fall in the