Albania cuts rate 25 bps to historic low as inflation falls

    Albania's central bank cut its benchmark refinancing rate by 25 basis points to a historic low of 3.75 percent, saying the rate reduction should help ensure that inflation meets the bank's target as inflationary pressures are low and have been declining in recent months.

    The Bank of Albania, which cut rates by 75 basis points in 2012, said economic activity this year is positive and similar to 2012 but growth is expected to remain below potential and demand-side inflationary pressures are expected to remain low.

    The central bank forecasts annual inflation this year between 0.8 and 3.8 percent compared with 2012's average inflation rate of 2.0 percent, following December's 2.4 percent inflation rate.

    The central bank targets inflation of 3 percent, plus/minus 1 percentage point. 

    Albania's central bank governor, Ardian Fullani, said foreign demand had been the main driver of economic growth this year and data show this trend continuing in the fourth quarter. In the third quarter, 

Albania's Gross Domestic Product rose by 2.4 percent from the second quarter for annual growth of 2.7 percent, up from 2.1 percent in the second quarter and the first quarter's contraction of 0.2 percent.

    "On the other hand, domestic demand remains sluggish, due to the lack of fiscal stimulus and the performance of slow consumption and private investment," Fullani said in a speech after the central bank's council approved the semi-annual statement on January 30.

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