March 28, 2019 / 5:47 PM / 4 months ago

Albania holds rates at record low, to shape stimulus for economic growth

* Albania holds rate, promises stimulus

* To shape stimulus to economy’s needs

* Risks could delay policy normalisation

By Benet Koleka

TIRANA, March 28 (Reuters) - Albania’s Central Bank kept its benchmark interest rate at a record low of 1 percent on Thursday and repeated that it would shape its stimulus measures to support the speed and stability of economic growth.

Governor Gent Sejko, speaking after the bank’s Supervisory Board rate-setting meeting, added that the board had also kept the one-day deposit and one-day lending rates unchanged at 0.1 percent and 1.9 percent respectively.

“Monetary policy will remain stimulative in the medium term, but the intensity of stimulus will be tailored to the speed and stability of the improvement of economic activity,” Sejko said.

Should risks like the deterioration of foreign economies, the tense domestic political situation and the mismatch of demand and supply for lending crop up, they “would delay the normalisation of monetary policy”, Sejko said.

The central bank has been cutting the benchmark rate to the historical low of 1 percent over the period of a decade to spur lending and growth.

Average annual inflation in January and February had slowed to 1.8 percent as the appreciation of the lek against the euro reached its full effect. Internal pressures were also still insufficient to get inflation to its goal of 3 percent, he said.

“According to our forecasts, this effect (of the strong lek) will peak during the first half of 2019 and gradually wane along the coming quarters,” Sejko said.

Citing indirect data, Sejko said the growth rate - Albania hopes to achieve a gross domestic product growth of some 4 percent in 2018 - had slowed down in the last two quarters due mainly to lower electricity output, but it would not affect growth later.

Referring to month-long opposition rallies seeking snap polls over alleged election fraud and graft, Sejko said they had not affected the economy negatively, but warned they could over time if they continued so the bank would react if needed. (Reporting by Benet Koleka Editing by Alexander Smith)

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