to 2011. however, the fiscal policy was stimulating during the fourth quarter, materialising in 35 % expansion of the budget deficit for this period. though at low rates, public expenditure is expected to have positive contribution to economic activity in 2013. the monetary policy eased further in january, through the key interest rate cut to the record low of 3. 75 %. the easing was transmitted into the interbank market interest rates during february, while it is expected to be transmitted into other segments of the financial market. low government demand for borrowing has exercised downward pressures on government securities yield. overall, monetary and financial developments point to low inflationary pressures and liquidity risk. monetary indicators continued to slow down in december, as well. annual money supply growth fell to 5. 0 %. developments in the external sector were the main drivers of bis central bankers ’ speeches money growth, whereas domestic demand for money was low. the relatively low demand of the government for borrowing and higher demand of households to invest in public debt securities reflected in reduced funding of the budget deficit by the banking system. similarly, credit to the economy recorded low annual growth rates both for businesses and households. the domestic currency prevailed over foreign currencies in the credit market, hence enabling better transmission of the monetary policy signals to the economy. recent information reconfirms our projections for future economic developments. in the period ahead, economic growth will be driven by economic developments in the global setting and in our trading partners, the fiscal policy nature and enhanced productivity. in 2013, economic activity is expected to remain weak and will continue to be driven by net exports growth, although at lower rates from 2012. the forecast is based on a non - encouraging economic outlook for our trading partners. it also reflects the low diversification of albanian exports. domestic demand is expected to remain at low levels, reflecting the sluggish private consumption and investments and the positive contribution of the public sector. taking into account the available information, the bank of albania deems that, with 90 % probability, the consumer price inflation is expected to range between 0. 8 – 3. 8 %, after 12 months. this assessment takes into account our projections for the continued negative output gap, low pressures from global market prices, and anchored expectations of economic agents. concluding, the bank of albania expects the inflationary pressures to remain weak in the medium run. * * * at the end of the discussions, the supervisory council decided to keep the key interest rate unchanged at 3. 75 %

private sector to fund its liquidity, consumption and investment needs, materialising also the hesitation of the private sector to commit to long - term projects. in addition to demand factors, the supply of loans is assessed to have been more tightened in the second half of 2011, reflecting the added prudence of the banking system in lending. latest developments in financial markets are influenced by the normal and quiet performance of demand and supply, which is in line with the monetary policy signals. the key interest rate cut to 4. 50 % is reflected in eased borrowing costs for banks, while it is expected to be completely transmitted to other higher - maturity market segments. overall, risk, liquidity and inflation premiums in financial markets remain contained. projections for the expected performance of the economy support the assessment for positive, though below potential, growth of the albanian economy for the year ahead. foreign demand is expected to continue to provide positive, but more moderate, contribution to aggregate demand increase. likewise, the impulse by the fiscal sector is expected to be lower than in the past year. under these circumstances, the growth speed and rate of the economy at home will be determined largely by the performance of private domestic demand components : consumption and investments. our analyses reveal the existence of room for higher growth in the future. this growth will be supported also by stimulating monetary and financial conditions, in response to the monetary policy of the bank of albania. * * * taking into account the above overview, the supervisory council of the bank of albania deemed that the inflationary pressures remain subdued over the monetary policy horizon. the output gap will continue to be negative in the period ahead, materialising in low inflationary pressures originating from domestic demand. moreover, inflationary pressures from developments in the global economy are expected to be downward, whereas inflation expectations remain anchored. bis central bankers ’ speeches the expected performance of real and monetary indicators is reflected in projections for the inflation, which is expected to range within the target of the bank of albania for the period ahead. at the conclusion of discussions, the supervisory council decided to keep the key interest rate unchanged at 4. 50 %. this decision serves to comply with our medium - term inflation target and provides the appropriate monetary conditions to stimulate albania ’ s economic activity. the bank of albania remains heedful to future economic and financial developments at home and abroad as well as diligent to accomplish its mandate. bis central bankers ’ speeches