gent sejko : current situation and prospective of the albanian economic development greeting speech by mr gent sejko, governor of the bank of albania, to the general assembly of the american chamber of commerce, tirana, 17 november 2022. * * * mr president of the american chamber of commerce, honourable minister ibrahimaj, your excellency ambassador kim, dear ladies and gentlemen, it is a real pleasure to join all of you in the general assembly of american chamber of commerce ( amcham ). also, it is an honour to address to this assembly and share with you opinions on the current situation and prospective of the albanian economic development. at the beginning, i would like to extend my consideration for the american chamber of commerce. this chamber - encompassing more than 200 member companies - is one of the most important business communities in albania. through training activities, promotion of albania as a business destination and participation in discussions on the development policies, it contributes in : improving the business climate and model ; attracting foreign investments ; and strengthening the economic relationships between the united states of america and albania. nowadays, this collaboration becomes even more important, when businesses, in both sides of the ocean, are tackling complex and unprecedented challenges. after two years of the pandemic lingering, the military aggression in ukraine triggered a new economic reality we are facing with. in addition to substantial loss of human life, this conflict caused headwinds in global markets of goods and in global supply chains. as a result, inflation and uncertainty picked up sharply across the globe, weighing heavily on those in needs, and brought about negative consequences on global growth. albania, as a small and open economy, is also experiencing this new created environment and in turn becoming part of it. the soaring prices in global markets drove up progressively inflation in albania, which peaked at 8. 3 % in october. we deem, that this high inflation is the main challenge for economic policies and operators in the private sector. we all are aware about the harmful consequences the high inflation has on households, businesses and on the overall economy. it decreases the purchasing power of our income, deflates savings, heightens uncertainty for the future, and reduces the informing role of prices in the economy. it increases the financial cost and curtails the ability of businesses and households to take well - informed decisions on consumption, savings and investments in the future. 1 / 3 bis - central bankers'speeches in this view, the priority of the bank of albania

##lationary spiral, although these were somewhat delayed. long - term inflation expectations were declining, but not much attention was paid by the bank or those in academia to their potential effects on monetary policy. in response to japan's financial crisis in the 1990s, the bank expanded its balance sheet and conducted both funds - supplying and funds - absorbing operations - - i. e., it actively provided funds to money markets and at the same time absorbed excess reserves by selling bills. however, this does not mean that the bank provided excess reserves and allowed the decline in market interest rates to 0 percent. after all, there was no such concept of quantitative easing at that time. another significant lesson was that the excessive monetary easing before the financial crisis was the source of the huge economic bubble. in the united states as well, large - scale monetary easing after the bursting of the it bubble and subsequent moderate tightening at a measured pace became the source of the housing bubble, which led to the global financial crisis. see bank of japan ( 2006 ). with hindsight, the bank at least should have clarified its firm determination not to allow the decline in long - term inflation expectations, as was done by the federal reserve after the global financial crisis and by the european central bank after the sovereign debt crisis. d. relationship with labor market reform in my view, as a measure to raise long - term inflation expectations that already have declined to a low level, it is important to have structural policies, particularly labor market reform. if long - term inflation expectations have some kind of relevance to the potential growth rate, it is necessary to raise both at the same time. to this end, one important measure is labor market reform. if such reform leads to rises in labor productivity and the labor force participation rate, the potential growth rate will increase from a longer - term perspective and firms'expected rates of return and households'permanent income also will increase. this will strengthen monetary easing effects and the inflation rate will increase. then, the adaptive formation mechanism of inflation expectations, which is unique to japan, will bring about a positive influence on long - term inflation expectations. in japan, some labor market practices could be constraints on raising long - term inflation expectations. therefore, labor market reform should be actively pursued. given that there is an increasing sense of labor shortage caused by the population decline, now is an ideal time to take a step forward in labor market reform. i will next focus on three possible reform measures. first, a more flexible adjustment