far economic activity performance and projections for 2013 support the outlook for positive economic growth close to the previous year ’ s figure. foreign demand is expected to contribute positively to albania ’ s economic growth, but this contribution is expected to be lower due to unfavourable developments in trading partner countries and relatively low diversification of albanian exports. private demand is also expected to be positive, taking advantage of monetary stimulus growth and domestic savings utilization. finally, the public sector is also expected to provide a positive stimulus. despite the positive growth, the economic activity in albania is expected to remain below its potential during the current year and the demand - side inflationary pressures are expected to remain low during this time horizon. the bank of albania deems that with a 90 % probability, the annual inflation as to four quarters ahead is forecasted to fluctuate within the 0. 8 – 3. 8 % band. low annual inflation rates and forecast for their continuation over the monetary policy time horizon dictate the maintaining and strengthening of the stimulating monetary policy over the next four quarters. * * * considering the information summarised above, the supervisory council deems that consumer price pressures in albania remain weak along the monetary policy time horizon and have shifted downward during the last months. concluding, the supervisory council decided to lower the key interest rate by 0. 25 percentage points, to 3. 75 %. this decision aims to create appropriate monetary conditions to meet the medium - term inflation target. the easing of monetary conditions keeps the short - term financial market interest rates low, encouraging the activity and decreasing the related liquidity trading premia. by lowering the financing costs, the bank of albania aims to increase consumer loans and investments in the economy. this transmission mechanism promotes the aggregate demand, and under current circumstances, creates appropriate conditions for meeting the medium - term inflation target. bis central bankers ’ speeches

easing monetary policy during the last three years. the monetary stimulus has increased progressively during this period, bringing the key interest rate to record low levels and mitigating the liquidity pressures on the interbank market. however, the pass - through of easing monetary policy effects on the economy has been contained due to higher perceived risk premia and changed stance by financial market agents and the real economy. over the first half of the year, the domestic primary market faced structural changes arising from implementation of new tight measures by the european supervisory authorities. this development impacted on maintaining relatively high yield rates, despite the easing monetary policy and lowering short - term interest rates in the money market. normalisation of the primary market in the second half of the year was reflected in progressively falling yields over this period. this tendency might have been passed on to all - denominated private sector credit costs, though with lower intensity as a consequence of risk premia reflected in private agents ’ credit price. overall, controlling the borrowing in the domestic money market, expanding the government securities investment base and stabilising the risk premia in the economy create grounds for a better functioning of transmission channels in the future. therefore, the bank of albania believes that the longterm public debt sustainability and public borrowing constraint in the domestic money market help enhance the monetary policy effectiveness and increase the space for the private sector credit of the economy. monetary indicators were characterised by slowing growth rates in the second half of the year. they signal low monetary inflation pressures on the economy. the annual monetary supply growth averaged 5. 9 % in october and november, supported primarily by developments in the external sector of the economy. money demand by the domestic agents of the economy was low. the increase in households ’ participation in public debt securities was reflected in lower financing of this sector by the banking system. businesses ’ and households ’ demand for funding decelerated significantly, reflecting the low demand for consumption and investments. also, banks continued to pursue a more prudential approach in lending, applying tight standards in response to uncertainties perceived at sector level and the economy. responding to them, annual growth of credit to economy reached 4 % in november. credit to economy was based on the 18 % increase in all - denominated loans, against the 3. 2 % decline in foreign currency - denominated loans. also, credit growth continued to be driven by increase in business loans, while consumer loans and home loans appeared rather low. bis central bankers ’ speeches the so -