- Decision
- Maintain
- Rate change
- 0 bps
- base interest rate
- 2.75%
The Supervisory Council of the Bank of Albania on 26 March 2025 left the policy rate at 2.75%, with the overnight deposit and lending facility rates held at 1.75% and 3.75% respectively, judging the current stance sufficient as inflation, averaging 1.9 % in January–February on lower energy and food prices, sits near target while growth, employment and credit expand. The policy rate has been unchanged at 2.75 % since at least the February 2025 meeting. Money-market conditions remain liquid with low risk premia, sustaining rapid private-sector credit growth of 16.7 % y/y in the first two months and pushing the non-performing loan ratio to a decade low of 4.06 %. Solid domestic demand, private-sector wage growth of 9.5 % y/y and a fall in unemployment to 8.5 % in 2024 underpin activity, though goods exports and industrial output have softened amid fiscal consolidation. A stronger exchange rate and lower imported inflation, together with S&P’s upgrade of Albania’s sovereign rating to BB, support external stability. The council sees a neutral balance of risks but flags heightened geopolitical tensions and potential trade barriers as downside threats, and it reiterated that future moves will hinge on incoming data, especially domestic inflation dynamics, to keep inflation on course for the target.
Rate evolution
From July 2025 to August 2026, the Bank of Albania cut the policy rate by 25 basis points to 2.50% and then left it unchanged, including at its 5 August 2026 meeting. Through May, the pause was framed against economic growth, rising employment and wages, credit expansion and calm financial markets, while inflation stayed below the 3% target despite a mild pickup, as low imported inflation and exchange-rate appreciation offset firmer domestic pressures concentrated in rents.
In November 2025, the Bank judged the stance appropriate because inflation was expected to return to target in the first half of 2026, with risks seen as balanced between downside risks from trade and geopolitical tensions and upside pressure from labour shortages and rapid wage growth. By March 2026, and with the rate unchanged again in May, uncertainty was presented as more acute and externally driven, centered on the Middle East conflict and oil prices, and holding steady was seen as supporting a return to target during 2026 absent strong supply shocks. In August, the Bank judged the stance remained appropriate as second-quarter inflation averaged 3.0%, reflecting higher international oil prices and stable demand, while projections showed inflation slightly above target in the short term before gradually returning towards it and risks remained tilted towards higher inflation and weaker growth.