- Decision
- Maintain
- Rate change
- 0 bps
- base interest rate
- 2.5%
The Bank of Albania held its base interest rate at 2.5%, judging an unchanged stance appropriate amid solid growth, rising external inflation pressures and mounting uncertainty. The rate has remained at that level since November 2025. The central bank also kept overnight deposit and lending rates unchanged at 1.5% and 3.5%, respectively. Inflation eased to 2.9% in September as rent inflation slowed, but is projected to rise slightly above the 3% target in the short term before returning to target during 2028. The economy expanded 3.6% in the first half of 2026, with growth expected to remain close to potential over the medium term, while the non-performing loan ratio remained historically low. The lek continued to appreciate, partially cushioning the impact of higher foreign prices. Rising oil and other energy prices drove broader international inflationary pressures. With risks tilted towards higher inflation and weaker growth, the central bank acknowledged a possible need for future policy normalisation but stressed a cautious, flexible approach, with decisions dependent on incoming information and risks to a sustained return of inflation to target.
Rate evolution
From July 2025 to November 2026, the Bank of Albania cut the policy rate by 25 basis points to 2.50% and then left it unchanged, including on 3 November 2026. In November 2025, it judged the stance appropriate because inflation was expected to return to the 3% 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 of Albania 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. On 3 November 2026, the Bank of Albania held the policy rate at 2.50%, judging that the stance balanced increased uncertainty against possible future policy normalisation as third-quarter inflation stood at 3.2%, external price pressures strengthened and domestic pressures eased, while projecting inflation somewhat above target in the short term before returning to target during 2028, with risks tilted towards higher inflation and weaker growth.