and the particular features of international financial markets at present, financial volatility in emes may be widely transmitted even in the absence of crisis or near - crisis episodes. in other words, policy makers in aes need to carefully consider not only the consequences of their policy decisions on emes, but also the risk of spillbacks from emes as a result of policy actions in aes. the implications for international policy cooperation are evident.

. 1 / 4 bis - central bankers'speeches despite the limited direct exposure of albania to russia or ukraine, the macroeconomic scenario changed almost overnight following the russia's war in ukraine. albania is now facing the challenges arising from the surge in international prices of energy, tighter global financial conditions, which are likely to persist and the economic slowdown in europe. inflation reached at 8. 3 % in october, continuing to remain the main threat to the macroeconomic stability and to both the stable and long - term growth of albania. given these circumstances, the bank of albania has undertaken a gradual monetary policy normalization process, ensuring that the speed of this normalization will return inflation to target within a reasonable period of time and with the lowest cost possible to the economic activity. our efforts to control and contain inflation have also been helped by the appreciation of our currency vis - a - vis the euro. during 2022, our currency, the lek, has appreciated by 2. 5 % on average against the euro, due to significant revenues generated by tourism, high fdis, and stable risk premia in our domestic financial markets. this was further strengthened by the convergence of our monetary policy cycle with that of the euro area. in parallel, the regulated energy price for albanian households has helped in absorbing the foreign pressures. this conclusion is well documented by previous and recent research conducted by our staff at the research and policy departments and by the econometric models that support our monetary policy. foreign price pressures helped by persistent domestic demand are already feeding to inflation of domestically produced goods and services, thus driving to the increase of production costs, and most importantly, of inflation expectations. this is evident in the labor market, capacity utilization rate and the capital markets, which seem to have already internalized these expectations in their decision making. the vast body of research conducted in the area of monetary policy has documented the real risk of high and persistent inflation and inflationary expectations. it also shows that without a strong and committed monetary policy response, inflation expectations become self - fulfilling, leading to increased uncertainty, disrupted price signals, inefficient distribution of resources, reduction of economic growth and increased long term volatility. our experience, research and current analysis, show that under current conditions, the only responsible policy for the central bank is to respond by increasing the policy rate and reinforcing its commitment to price stability. this course of action will create the necessary monetary conditions to control inflation and inflation expectations, and will eventually