The low demand for consumption and investment, and the banks' conservative lending policies, have slowed the monetary indicators. The increase in the money supply slowed down to about 2.5% in October and November due to private sector's lower demand for funding. Lending to economy continued to contract and in November, it was 2.4% lower than a year ago. The above monetary and economic dynamics has exerted weak inflationary pressures. The low aggregate demand has expanded the negative output gap. The labour market pressures have been subdued against a setting of unchanged unemployment rate, moderate wages, and partially-used capacities. These developments have affected the control on output costs and profit margins, and are reflected in low core inflation rates over this period. Also, imported inflation has been downward due to lower primary commodity prices in the international market and stable exchange rate. Based on the economic outlook and aiming to encourage aggregate demand, the Bank of Albania lowered the key interest rate by 0.5 percentage points, at 3.0% in the fourth quarter. Also, Bank of Albania's monetary policy decisions are associated with ongoing liquidity injections and orientations toward the future monetary policy stance. This policy has  2  BIS central bankers’ speeches  managed to keep liquidity premia and inflation in check, by contributing to lowering the interest rates in the interbank, government debt security, lek loan and deposit markets.
Ardian Fullani: Overview of Albania’s latest economic and financial developments Speech by Mr Ardian Fullani, Governor of the Bank of Albania, on the Monetary Policy Decision-Making of the Bank of Albania’s Supervisory Council, Tirana, 29 January 2014. *  *  *  Today, on 29 January 2014, the Supervisory Council of the Bank of Albania reviewed and approved the Monetary Policy Statement of the Bank of Albania on the second half of 2013. Given Albania's latest monetary and economic developments and discussions on their outlook, the Supervisory Council of the Bank of Albania decided to keep the key interest rate unchanged, at 3.0%. The Supervisory Council deems that the inflationary pressures from the real and financial sectors of the economy are weak and will remain so. These circumstances require maintaining a stimulating monetary policy over the period ahead. The monetary stimulus, transmitted through the low key interest rate and ongoing liquidity injection, provides the proper conditions for meeting our inflation target in the medium term. Let me now proceed with an overview of the economic developments and key issues discussed at today’s meeting. *** Year 2013 was a difficult one for the Albanian economy. Aggregate demand and economic growth remained at low levels; inflation fluctuated around Bank of Albania's lower targeted band, while the budget deficit and public debt increased sharply. The unfavourable economic environment, both at home and abroad, led to this performance. Moreover, Albania’s June parliamentary elections added uncertainties to the economy and financial markets.