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

policy that allowed us to absorb the excess money supply in the economy. the joint action of the various absorption factors has led to a monetary contraction of around ars 27 billion in 2006. both the financial system and the public sector have contributed to the absorption of surplus pesos. due to the scheme set forth by the bcra, the early repayment of rediscounts led to a monetary contraction of around ars 6. 6 billion in 2006, and the number of institutions that are still indebted to the bcra was reduced to two. the minimum requirement policy contributed with ars 4. 4 billion, while the main tool used was the placement of central bank securities, which contributed with ars 10 billion. consequently, in early december the stock of central bank bills and notes amounted to ars 41. 2 billion ( 29 percent of lebacs and 71 percent of nobacs ). throughout the year, the nobacs ’ share at a floating interest rate has increased ( 64 percent of the stock in early december ), vis - a - vis cer - indexed instruments ( 5 percent in that period ) and lebacs in pesos ( 31 percent ). as a result of this strategy, the central bank ’ s debt average term was extended from 260 ( at the beginning of the year ) to 360 days ( in early december ). throughout the year, the central bank introduced changes to the minimum requirement policy, raising minimum cash requirements for demand deposits. in particular, in april we eliminated interest paid on demand deposits and raised the minimum cash requirements from 15 to 17 percent. we also reduced the maximum interest rate paid on funds held at the central bank without full minimum requirements from 75 to 50 percent of the badlar rate for private banks ; and reduced the interest rate paid on the liquidity requirements on money market funds from a nominal year - over - year 2. 55 percent rate to a nominal year - over - year 0. 5 percent rate. in august, additional measures were adopted, raising the minimum requirements for demand deposits in pesos to 19 percent, eliminating the requirements for time deposits of over 180 - day residual maturity, and establishing that only 67 percent of cash held by banks could be used for minimum requirements purposes. these measures aimed at recovering prudential liquidity, acting, in turn, indirectly on the means of payment, promoting the extension of the funding structure, and thus facilitating an increase in credit. our aggressive sterilization policy is feasible due to the central bank