Instead, if you pay attention to the incoming economic news and listen to our assessment about how the outlook is evolving, then I think you will be able to judge for yourself when liftoff is likely. What also matters for financial asset prices is the likely post-lift-off trajectory of short-term rates over the medium- to longer-term. In fact, this should be more important than the particular month in which the normalization process starts. On this score, I think it is hard to be precise about the expected path of short-term rates. That is because it depends on two important factors: (1) how the economic outlook evolves, which depends, in part, on how loose or tight monetary policy actually is at a given level of short-term rates, and (2) how financial conditions broadly react to changes in the level of short-term rates. My own view is that the upward trajectory of short-term rates is likely to be relatively shallow. This reflects several factors. First, the lack of strong forward momentum in the economy despite the low level of short-term interest rates suggests that U.S. monetary policy is not as accommodative as one might think. In particular, the lack of strong momentum suggests that the real equilibrium federal funds rate today is considerably lower than the 2 percent rate assumed in the standard Taylor Rule formulation.
As a result of the enhanced confidence in the domestic banking system, the share of assets to the GDP increased in 2006 to the peak level of 70 per cent, which is comparable to that of the Central and EastEuropean countries. The performance of commercial loan to private sector and to households is also satisfactory. Its growth rate has been constantly exceeding the expansion rate of banking assets. Over the last years, private loan has improved considerably; for 2005-2006 it recorded a cumulative growth of 175 per cent, which is the highest growth recorded in the region and the  BIS Review 102/2007  1  Central and East-European countries. Another characteristic in support of foreign crediting institutions is the free choice of currency, where almost 3/4 (three-fourth) of total loan was extended in foreign currency. Thus far we may say that credit supply is in prudent levels, since non-performing loans’ portfolio, though increased moderately to 3.1 per cent of gross loans in 2006, provides evidence for a limited exposure of the banking sector to non-settlement risk. However, despite the considerable improvement in the assets quality and the commercial banks’ financial performance, the growth of lending to the private sector and to households remains low as a share to the GDP – about 21.3 per cent in 2006, compared to 49 per cent in Central and East-European countries – providing evidence for other non-utilized banking services capacities in the Albanian economy.