COVID / 19 Bank of Albania reduces the key interest rate, from 1.0% to 0.5%

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Today, at its meeting of March 25, 2020, the Supervisory Council of the Bank of Albania decided to further facilitate the monetary policy stance and monetary and financial conditions in the country. More specifically, the Supervisory Council decided:

  • Lower the key interest rate, from 1.0% to 0.5%;
  • Reduce overnight loan interest rate, from 1.9% to 0.9%;
  • Keep overnight deposit interest rate unchanged at 0.1%.

In a press conference after the meeting of the Supervisory Council, Sejko said that the pandemic is a challenge for the economy and the financial sector.

"These measures that we have taken, within our area of competence, enable and complement the fiscal package announced by the Albanian government, which aims to shift part of the financial bill to cope with the crisis from the private sector to the public sector. In any case, The objective of our action will be to maintain the monetary and financial stability of the country, alleviate the costs of the crisis for Albanian businesses and families, and create the premises for a speedy recovery of the economy in the coming period. " stressed Governor Sejko.

Attached you will find the full speech of Governor Sejko:

Dear public,

I am in front of you today, in this unusual form of communication, to inform you of the latest monetary policy decision of the Bank of Albania. This decision is taken following the previous measures of the Bank of Albania to mitigate the impact of the COVID-19 pandemic on the economic and financial health of the country.

Today, at its meeting of March 25, 2020, the Supervisory Council of the Bank of Albania decided to further facilitate the monetary policy stance and monetary and financial conditions in the country. More specifically, the Supervisory Council decided:

  • Lower the key interest rate, from 1.0% to 0.5%;
  • Reduce overnight loan interest rate, from 1.9% to 0.9%;
  • Keep overnight deposit interest rate unchanged at 0.1%.

The spread of the COVID-19 pandemic in Albania poses a challenge to our economy and financial sector. The necessary precautionary measures, taken by public and private authorities to limit the spread of the COVID-19 virus in the population, will also have a dual impact on economic activity. On the one hand, the temporary reduction of production and employment leads to the reduction of the supply of goods and services in the market and the reduction of household income. On the other hand, social distancing leads to declining demand, as well as shrinking sales, revenue and business liquidity.

In the Supervisory Board's view, lowering the key interest rate is a necessary measure to reduce the cost of new borrowing, to reduce the cost of servicing existing debt, and to facilitate the circulation of liquidity to Albanian businesses and households. It helps the normal functioning of the monetary policy transmission mechanism as well as relieves the pressure on the financial balance sheets of economic operators, giving them more time, space and breathing to cope with the shock.

This decision today complements the other measures we have taken to minimize the effects of the pandemic. In recent days:

  • The Bank of Albania has increased its operational capacities to guarantee the supply of the economy with currency and banknotes, as well as to guarantee the normal functioning of the electronic payment system. Within the time limit of movement set by the public authorities, all economic operators should be aware that the payment system will function normally.
  • The Bank of Albania has adopted the operational strategy of unlimited liquidity injection in the banking sector. This sector, and through it businesses, households and the public sector, will have the opportunity to attract to the Bank of Albania all the necessary liquidity and required by them.
  • The Supervisory Council of the Bank of Albania decided to facilitate the one-quarter deferral procedures for the payment of loan installments to businesses and households affected by the crisis, providing the banking sector with the necessary regulatory space to do so.

These measures that we have taken, within our area of competence, enable and complement the fiscal package announced by the Albanian government, which aims to shift part of the financial bill to cope with the crisis from the private sector to the public sector.

The Supervisory Board remains under constant monitoring of the situation. In line with the measures taken by other central banks and depending on the evolution of the situation, the Bank of Albania remains ready to use all operational instruments and regulatory space at its disposal to minimize the consequences of the pandemic on the Albanian economy and financial system.

In any case, the objective of our action will be to maintain the monetary and financial stability of the country, alleviate the costs of the crisis for Albanian businesses and families, and create the premises for a speedy recovery of the economy in the coming period. Meeting these preconditions paves the way for meeting our medium- and long-term price stability target.

Our monetary, regulatory and institutional measures will remain in place for as long as necessary.

In a longer-term perspective, the Supervisory Council finds it appropriate to emphasize that the messages we have given continuously on the health of the Albanian economy and banking system remain valid. Let me reiterate:

  • Albania enjoys good economic and financial health;
  • the parameters of the functioning of the economy and the banking sector are sound;
  • Liquidity and capital reserves of the Albanian banking sector are high.

In this context, the Supervisory Council notes that minimizing the long-term consequences of the pandemic requires serious, coordinated and harmonized efforts by all public and private authorities in the country.

 

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