- 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 current stance appropriate as inflation is expected to rise moderately and temporarily over the next two quarters while economic activity continues to grow solidly near potential. The rate has remained at 2.5% in every provided decision since November 2025. The central bank also kept the overnight deposit and lending rates at 1.5% and 3.5%, respectively. Consumer inflation averaged 3.3% in July-August, above the 3% target, and is expected to decline gradually toward target from mid-2027, while the economy grew 3.6% in the second quarter and private-sector credit continued to expand rapidly. Exchange-rate appreciation moderated but did not fully offset stronger imported inflation. Higher global oil, energy, food and other commodity prices, amid intensified geopolitical tensions in the Middle East, have tilted inflation risks upward and medium-term growth risks downward. The Supervisory Council said rising inflation pressures and upside risks strengthen the case for future tightening, with any move dependent on new inflation data, overall price pressures, fiscal policy and exchange-rate developments.
Rate evolution
From July 2025 to October 2026, the Bank of Albania cut the policy rate by 25 basis points to 2.50% and then left it unchanged, including at its 7 October 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, centred 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. In October, against solid growth and rapid credit expansion, it noted that July-August consumer price inflation averaged 3.3%, somewhat above expectations, as higher global commodity prices and inflation among trading partners outweighed the exchange rate’s dampening effect, and projected a moderate rise over the next two quarters followed by a gradual decline towards target from mid-2027, while upside inflation risks strengthened the case for future policy tightening.