- Decision
- Maintain
- Rate change
- 0 bps
- base interest rate
- 2.5%
The Supervisory Council of the Bank of Albania kept the base rate unchanged at 2.5 percent on 1 October 2025 after approving its Interim Monetary Policy Report, assessing that existing economic and monetary conditions warrant an unchanged stance. Following a single 25 bp cut in July from 2.75 percent, the rate has been on hold in August and again in October. The overnight deposit and lending facility rates were likewise maintained at 1.5 percent and 3.5 percent, sustaining the liquidity framework that prior reports described as ample and supportive of calm financial-market conditions. Consumer price inflation averaged 2 percent in the first quarter of 2025, near the 3 percent target, while GDP grew by 4 percent in 2024 and continued to expand, though at a slightly slower pace, in early 2025 on the back of resilient consumption, business investment and tourism. Private-sector credit rose 16.7 percent in the first quarter and the non-performing loan ratio improved to 4 percent, amid a more stable exchange rate over the past two years. The council reiterated that future policy moves will depend on incoming data, particularly assessments of domestic inflationary pressures and external developments.
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.