- Decision
- Maintain
- Rate change
- 0 bps
- base interest rate
- 2.5%
The Bank of Albania held its base interest rate at 2.5%, judging the stance appropriate as inflation remains controlled and economic growth stays positive, while inflation is expected to remain slightly above target in the short term before gradually returning to target. The central bank cut the rate by 25 basis points from 2.75% in July 2025 and has held it since. It also maintained the overnight deposit and lending rates at 1.5% and 3.5%, respectively, amid ample financial-market liquidity and low interest rates. Consumer inflation averaged 3.0% in the second quarter, while first-quarter economic growth was 3.7% and private-sector credit expanded 14% year on year in the second quarter. Exchange-rate strengthening partly mitigated the inflationary effects of higher international oil and energy prices. Middle East geopolitical tensions remain a source of uncertainty, tilting medium-term risks upward for inflation and downward for growth. The Supervisory Council said it would monitor new data and respond promptly and forcefully to any material risk to 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.