In this step, the fixed interest rate for one-week repo auctions will be determined by adding 50 basis points to the declared overnight borrowing interest rate of the Central Bank. Therefore, the fixed interest rate for one-week repo transactions will become the reference (policy) interest rate of monetary policy. In the second step, the difference between the one-week repo auction interest rate and the overnight borrowing interest rate may be increased. The CBT may aim to create the secondary market average overnight interest rate around the one-week repo auction rate. The difference between the one-week repo auction interest rate and the overnight borrowing interest rate may be increased either by raising the one-week repo auction interest rate if the Monetary Policy Committee (Committee) decides that monetary tightening is required, or by lowering the overnight borrowing and lending interest rates if the Committee decides not to make any change in the policy interest rate. In this period, the differences between the oneweek repo auction interest rate and the overnight borrowing and lending interest rates may not always be symmetrical and will be determined by the Committee as an element of the operational framework of monetary policy. As a result, some of the measures taken in the foreign exchange and Turkish lira markets during the crisis are planned to be withdrawn gradually.
In line with the cyclical situation, this policy has provided its stimulus through the key interest rate cut and ongoing liquidity injection into the banking system. We have also revised the banking system regulatory basis from the viewpoint of easing it, in order to stimulate lending by the banking system. I avail myself of the opportunity to reiterate that the banking system remains profitable, liquid and well-capitalised. Safeguarding the stability of this system will always be on our focus. BIS central bankers’ speeches  1  Third, reducing uncertainties and risk premiums in the economy is an important priority. As I have already stated, these uncertainties stem, to a great extent, from the foreign market, but a part of them stems from the Albanian economy. Without intending to make a list, I will mention just a few: •  Reducing informality should be a primary objective. Besides outflows in public finances, informality brings hidden costs in terms of diminishing competition, inefficiency in terms of lack of balance sheet transparency, and artificially increased financing costs to businesses. •  Fostering the financial system infrastructure protection is another aspect deserving attention. The Bank of Albania signed and has already made effective a cooperation agreement with the People’s Bank of China, which also provides for the possibility to obtain liquidity in case of need. An important step in this regard is the agreement between the Deposit Insurance Agency and the European Bank for Reconstruction and Development to increase the deposit insurance coverage.