The Central Bank will be resolute in preserving this achievement of a low inflation environment going forward irrespective of domestic and international challenges that we may face in future. This is the prime reason why the Central Bank has embarked on a mission to upgrade the monetary policy framework with a view to strengthening the ability of the Central Bank to deliver sustained price stability amidst a rapidly evolving environment characterised by elevated uncertainty. During the year 2018, significant progress was made towards the transition to FIT in terms of initiating necessary amendments to the Monetary Law Act (MLA) with a view to establishing a strong Central Bank mandate, building effective fiscalmonetary coordination and further improving technical and institutional capacity. Let me elaborate on a few important areas in relation to the progress towards FIT. Last year, we highlighted the need and the importance of strengthening the existing mandate of the Central Bank to perform its key tasks related to price stability. It is widely accepted that a strong legal mandate is an essential prerequisite for the successful adoption of FIT as it is considered the linchpin that holds the entire framework together.
I do strongly believe that our efforts will persist in the future as well, enabling a smooth shift of the operational target and optimal functioning of their new form. Interbank market development Dear colleagues, Bank of Albania’s role in promoting the interbank market is indisputable. However, we are fully aware that the development of this market mostly reflects the results of the banking system’s own development and efforts. Therefore, the Bank of Albania requires your utmost attention in this regard. More precisely, in our discussion today we would like to have your opinion on the three steps we consider will boost the development of the interbank market. First, setting the prime rates in the functioning of commercial banks. These rates can and should serve as a guide to setting prices on banking products, both on the assets and liabilities’ side. Second, the functioning of the collateralized market through repo or reverse repo contracts. Although in its classical concept the interbank market is an uncollateralized market, its enhancement with the abovementioned instruments would open the way to its thorough development, ensuring a more efficient distribution of liquidity among the market operators. Third, banks can and should be active in quoting the liquidity in the Albanian lek, keeping the same stance as in the foreign exchange market. The constant quotation will encourage a more active liquidity management and it will enable its continuous price setting.