October 3, 2018 / 6:40 PM / in 8 months

Albanian central bank keeps rates on hold, sees no change before April

TIRANA, Oct 3 (Reuters) - Albania’s central bank kept its benchmark interest rate at the historic low of 1 percent on Wednesday and signalled there would be no change before next April.

Speaking after the bank’s board meeting, Governor Gent Sejko said they had also kept unchanged the rates on one-day deposit and lending rates respectively at 0.1 and 1.9 percent.

“The supervisory board believes... the normalisation of interest rates in the internal financial market will not start before the second trimester of 2019,” Sejko told reporters.

The bank has steadily cut the benchmark rate since 2008, from 6.25 percent to the current level of 1 percent, to spur lending and growth as it seeks to hit its annual inflation target of 3 percent.

Albania’s economy grew by 4.3 percent in the first half of 2018 and a similar trend was observed in the third quarter, Sejko said.

Growth came from private spending and investment, exports and electricity production in the first quarter, helped by an improving international economic environment.

Sejko said monetary stimulus would be needed to guarantee stable growth in the medium term, adding that the intensity of the stimulus would diminish in line with the growth performance and the speed with which inflation returns to target.

He said the bank saw inflation, which was slightly higher on an annual basis at 2.3 and 2.2 percent in July and August respectively, hitting the 3 percent annual target in 2020.

“This dynamic (of inflation) will be backed by the continued expansion of aggregate demand, leading to higher employment, wages and profit margins,” Sejko said.

Sejko said the board thought that demand and supply for hard currency, mostly euros, were stable and the appreciation of the lek to the euro represented “a lower threat to inflation”.

The euro fell to its lowest level to the lek in 10 years in June before the bank intervened to buy euros. At the end of the tourism season, Sejko said the demand and supply ratio for hard currency was “balanced” although the bank had not intervened. (Reporting By Benet Koleka, Editing by Gareth Jones)

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