In 1911, the renowned Austrian economist Joseph Schumpeter said: “...that the structure of modern industry could not be erected without finance, that it makes the individual to a certain extent independent of inherited possessions, that talent in economic life ‘rides to success on its debts’ even the most conservative orthodoxy of the theorists cannot well deny.” If you asked me why is financial education important, I would say it in these words: because it contributes to Albanians’ financial welfare. The more literate we are financially, the more capable we are to make decisions that contribute to our improved welfare. This is true for everyone, regardless of who we are or where we come from. As Friedman, the Nobel prize winner, says: “Economic freedom is an essential condition for political freedom”. Our exercising rights that result from economic freedom would be unavailing in absence of financial literacy and equality in the marketplace. This implies not only the same information at the same time, but also the capacity to use this information. Finances create an added value not only for the rich, but also for the entire society. It is necessary to create equal access for all citizens. Equal access to finances and equality before the law are the foundations of modern market economy. Finance and financial education walk side by side. While literacy may turn a poor man into a rich man, illiteracy, on the other hand, may conduct a rich man into misery. Finances are dangerous when you are not financially literate enough.
Subsequently, we have raised the deposit facility rate to 2%, a cumulative increase of 250 basis points (bp), the fastest in the euro's history. We have also created the new Transmission Protection Instrument to ensure the smooth transmission of monetary policy across the euro area. We have amended the conditions of the longer-term refinancing operations, with the specific aim of strengthening the transmission of interest rate increases. And we have announced our intention to stop reinvesting, from early March 2023, all the principal payments from maturing securities under our asset purchase programme, which will give rise to a gradual and predictable reduction in the size of the portfolio. Overall, this monetary policy normalisation process has already translated into a significant increase in market interest rates. But what can we expect in the future? At the last Governing Council meeting we stated that interest rates would still have to rise significantly at a steady pace to reach levels that ensure that inflation will return to its target. As I mentioned earlier, the latest ECB projections forecast inflation of 2.3% (i.e. above the 2% target) in 2025. Those projections were based on the market expectations for the future path of interest rates when they were prepared. Deeming the projections valid, interest rates would therefore need to rise more than the markets expected when they were prepared in order for inflation to return to its target.