in canada but in many other countries, about the appropriate interest rate setting when economic growth is rapid but inflation is low. governing council examined this issue closely from two perspectives. the first asks whether there are special factors that are temporarily pushing inflation lower, and we discuss this issue in a technical box in the mpr. generally speaking, central banks prefer to look through temporary factors. of course, our new core measures of inflation were developed to help us see through the noise in inflation data, but even these are not immune to temporary fluctuations. after careful assessment of the evidence, governing council agreed that a significant portion of the recent softness in our measures of inflation should prove to be temporary. nevertheless, even a one - time price change affects inflation for a year, simply because we gauge inflation on a year - over - year basis. some temporary factors are themselves gradual rather than one - off, such as increased competition in retail food stores. this all serves to underscore the data - dependent nature of monetary policy. 1 / 2 bis central bankers'speeches all things considered, governing council judges that in the absence of temporary factors, inflation would be running at around 1. 8 per cent, as excess capacity in canada is estimated to account for an inflation shortfall of about 0. 2 per cent. accordingly, as the gap closes in the months ahead, we expect inflation to head toward 2 per cent, with the rate of convergence determined by how quickly these various temporary factors unwind. our projection shows a modest overshoot of the 2 per cent inflation target in 2019. this is a product of the dynamics of our model, but it is an important reminder that, while our target is 2 per cent, our control range is a symmetric 1 to 3 per cent. having a target range acknowledges the uncertainty inherent in economic forecasting and inflation control. the chances of an overshoot will depend on how investment and potential output respond to tighter capacity constraints, a process that the bank will monitor closely. the second perspective on the low - inflation issue concerns the lags between monetary policy actions and their ultimate effects on inflation. it is worth remembering that it can take 18 to 24 months for a monetary policy action to have its full effect on inflation. this means that central banks must target future inflation by anticipating future deviations from target. and because inflation is measured with a lag, reacting only to the latest inflation data would be akin to driving while looking in the rear view mirror. in contrast, imagine a world where

europe about the chances of a credit - less recovery, given the actual very weak credit growth. while the long - term objective should be to create conditions for achieving a more balanced and diverse financial system, the shorter times objectives should focus one having a stable financial system that provides adequate financial services to its customers, both savers and borrowers, thus maintaining its fair share of contribution to the economic developments of a particular country. the banking sector in albania has felt the impact of the international financial crisis, as the weaker credit standards before the crisis and the weaker economic growth afterwards, have been translated into lower asset quality and difficulties to consistently maintain positive financial results. in front of higher credit risk, credit terms have been tightened and credit growth has been sluggish. in september 2013, credit growth turned negative driven by credit in foreign currency and to businesses. however, the banking sector remains well capitalized and liquid. banks have been able to raise new capital and financial support from their mother banks. especially, greek banks operating in albania have enjoyed strong support from their mother banks so far, and we expect this to continue in the future too, if needed. overall, in september 2013 the risk bis central bankers ’ speeches weighted capital of the banking sector stood at 17. 8 %, while the ratio of liquid assets to short term liabilities was 36. 5 %. the sector has shown strong preference for investments in albanian government debt securities and placements abroad. bank of albania has been taking a number of measures to support credit growth and address the loan quality problems. given the subdued inflationary pressures, we have lowered the policy rate to the record level of 3. 5 %. the path of the credit interest rate has followed this trend, although at a slower pace. given the weakness of the credit channel in the monetary transmission mechanism, we have tried to strengthen our impact by adopting some countercyclical measures to promote credit growth. in this regard, we have temporarily increased capital requirements for placements of banks abroad and have reduced those for credit in the domestic economy. in addition, we are promoting credit restructuring at an early phase by reducing provisioning requirements if that is the case. several legal and regulatory measures have been taken in cooperation with other authorities and the banking industry, to improve collateral execution process and facilitate loan write - offs. the results of such measures have been mixed so far, but in the coming months we expect their impact to be noticeable. this is also linked with the commitment of the government to pay