The Supervisory Council of the Bank of Albania announced today that it will keep the base interest rate unchanged at 2.5%, maintaining its current monetary policy stance. The decision reflects a balance between supporting economic growth and safeguarding price stability in a global environment still marked by uncertainties.
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Economic Outlook Remains Positive
Governor Sejko underlined that the available data suggests encouraging developments. Economic activity has maintained a solid growth trajectory, driven largely by domestic demand. Consumption and private sector investments are expanding, supported by higher household incomes, robust labor market dynamics, and a generally favorable financing environment.
Official statistics from INSTAT show that the Albanian economy grew by 3.5% in the second quarter of 2025, following a 3.7% growth rate in the first quarter. This performance, according to Sejko, is fully aligned with the Bank of Albania’s forecasts.
Growth has been fueled by rising demand for goods and services, increased private and public investments, and strong revenues from tourism. On the other hand, a contraction in merchandise exports and higher imports weighed negatively on the overall balance, limiting the net contribution of trade to growth.
Inflation Under Control
Inflation remains below the Bank of Albania’s medium-term target of 3%, standing at 2.4% in July and August, up slightly from 2.3% in the second quarter. This mild upward trend was influenced mainly by higher rental prices and stable oil prices, while food prices continued to decline.
Sejko explained that inflationary pressures in Albania are largely domestic, driven by growing demand, rising wages, and increased production costs. In contrast, external pressures remain weak, thanks to lower international commodity prices and the strengthening of the Albanian Lek, which has kept imported inflation at historically low levels.
“Inflation is expected to gradually converge to our 3% target by the first half of 2026,” said Sejko. “This reflects expectations of a slight rise in imported inflation, while domestic pressures are projected to remain stable and consistent with our monetary policy objective.”
Financial Sector Stability
The Governor also emphasized the resilience of Albania’s financial system. Monetary policy has remained accommodative, ensuring that financing conditions for businesses and households are favorable. Interest rates in the domestic market have followed a declining trend, reflecting the central bank’s policy easing and low risk premiums.
At the same time, the foreign exchange market has stabilized, with the Lek appreciating moderately in line with developments in the external sector and the Bank of Albania’s presence in currency operations. Credit to the private sector continues to expand, signaling confidence and liquidity in the banking sector.
“The overall stability of Albania’s macroeconomic and financial framework creates strong foundations for sustainable growth,” Sejko noted.
Labor Market and Wages
One of the most notable positive dynamics has been the performance of the labor market. Non-agricultural private sector employment rose by 3.4% in the second quarter, while the national unemployment rate declined to 8.5%. Private sector wages increased by 9.5%, reflecting both high demand for labor and shortages in the workforce.
This trend has boosted household incomes and consumer spending but also carries potential inflationary risks, as higher wages may feed into production costs and consumer prices.
Risks and Uncertainties
Despite the generally positive outlook, the Governor stressed that external risks remain significant. Geopolitical tensions, trade disruptions, and volatile global commodity prices continue to represent sources of uncertainty that could affect Albania’s economic trajectory.
According to the Bank of Albania, the balance of risks to inflation remains neutral in the medium term. Potential factors pushing inflation higher include stronger geopolitical tensions and greater fragmentation in global trade, while risks to the downside include slower-than-expected growth in partner economies or further declines in international commodity prices.
Policy Outlook
The Supervisory Council reaffirmed that the current monetary policy stance is appropriate for bringing inflation back to target in a sustainable manner. At present, monetary conditions are supporting growth close to potential, stabilizing labor market dynamics, and anchoring inflation expectations.
Looking ahead, policy decisions will remain data-driven, with flexibility to adjust to evolving economic conditions. “In a high-uncertainty environment, maintaining a cautious and responsive monetary policy ensures the necessary room to react effectively to any deviation from our baseline projections,” Governor Sejko emphasized.
Conclusion
The decision to maintain the key interest rate at 2.5% underscores the Bank of Albania’s confidence in the resilience of the domestic economy, while remaining mindful of external risks. With solid growth, low inflation, and stable financial markets, Albania’s economic outlook remains broadly positive.
However, the central bank also acknowledges that challenges persist, particularly from external factors beyond its control. For now, the combination of strong domestic demand, a dynamic labor market, and prudent monetary policy provides the foundations for continued stability and sustainable growth in the years ahead.