The appropriate response for us in setting interest rates, therefore, is to try to stay in step and keep pace - not running ahead, but equally not lagging behind. BIS Review 22/2001  3  The third and final area of uncertainty I want to focus on is the underlying strength of demand in the UK economy. The US slowdown may, as I have said, have some dampening effect on other countries, including the UK. The supply-side improvements I have described may enhance our growth capacity. Both these factors could provide grounds for the monetary stance to provide more stimulus to the economy, depending on how events develop. But a third area of uncertainty - the underlying strength of demand in the UK - could point to less need for stimulus. Consumer spending may be slowing somewhat, but it remains relatively buoyant. Retail sales continue to grow and housing market activity may be picking up. Consumer and business confidence remains steady, with new orders holding up well. The easing in sterling has improved our competitiveness in key export markets. Business investment is picking up. The planned increases in government spending are beginning to come through. Employment remains high and earnings are showing signs of some upwards creep as businesses experience skill shortages. All of this is welcome evidence of a healthy and thriving economy, and, with inflation remaining low, it is a performance that can be sustained without immediate risk of overheating.
The gross foreign reserve level, at the end of this period, was estimated at USD 1 billion and 244 million, adequate to cover 5.1 months of imports of goods and services. Based on the aforementioned developments, we may conclude that year 2004 contributed generally in further consolidating the country's macroeconomic equilibrium. Although full data for the yearend of 2004 are not yet available, there is a crystallization of the idea that the primary targets projected in the medium-term plan on the country's development have been met satisfactorily. According to the latest estimations, the Albanian economy grew by 6 percent under the conditions of a low inflation rate, far closer to the bottom level of the targeted band. The structural reforms, through their problematic concerns, have progressed during 2004. All this consolidating process has created the premises for a better stability in the future. The development program of the country for year 2005 already exists, part of which are the primary targets of monetary policy. The primary target of monetary policy for 2005, projected in the monetary program, remains the maintenance of the annual inflation rate within the two-to-four percent targeted range. This target is supposed to be met through the control of the monetary supply growth at an approximate level with the nominal growth of GDP, presuming that the velocity of currency circulation in the economy is stable. In this light, the annual growth rate of money supply for year 2005, projected in the monetary program, is 9.4 percent.