- Decision
- Maintain
- Rate change
- 0 bps
- base interest rate
- 2.75%
The Supervisory Council of the Bank of Albania kept the policy rate at 2.75 % on 7 May 2025, with the overnight deposit and lending rates unchanged at 1.75 % and 3.75 % respectively, judging the current cautious, proactive stance as suitable given solid economic growth, low and near-target inflation, and calm financial conditions despite elevated global uncertainty. The benchmark rate has remained at 2.75 % since at least February, when the Council began its current on-hold stretch. Liquidity in the money market is ample, risk premia are subdued and the foreign-exchange market has stabilised on a firmer lek. Consumer price inflation averaged 2 % in Q1, matching the previous quarter, reflecting weaker imported prices and higher food supply, while the bank still forecasts a return to its 3 % target by the first half of 2026. GDP grew 4 % in 2024 and continues to expand at a solid though slightly slower pace in early 2025, underpinned by household consumption, business investment and tourism; private-sector credit rose 16.7 % y/y in Q1 and the non-performing loan ratio fell to a historic low of 4.02 %. Imported inflation remains subdued amid a stronger exchange rate, although ongoing geopolitical tensions and trade-policy uncertainties pose balanced but heightened risks. The Council said future decisions will remain data-dependent and consistent with fiscal developments, exchange-rate movements and external conditions to secure price stability.
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.