The Bank of Albania decided to keep the lek rate unchanged at 2.5 percent, a measure that the Supervisory Council deemed most appropriate in these times of increased uncertainty. In a statement after the Council meeting, Governor Gent Sejko warned that war in Iran is a potentially extreme risk for the Albanian economy.
"The military conflict and geopolitical tensions in the Middle East are an extreme source of risk and uncertainty for the global and Albanian economy. This conflict has brought about a rapid and strong increase in the price of oil and other energy products on world markets. The duration, intensity and indirect transmission channels of this shock to the Albanian economy are difficult to assess with an acceptable degree of certainty," said the head of the Central Bank.
Albania has already begun to face the immediate effects of the military conflict in the Middle East, as oil prices have risen to record levels and agricultural inputs have become more expensive at an unprecedented rate, amplifying fears of a new wave of inflation. Sejko said that if the conflict continues, its consequences on the Albanian economy will be serious.
"The prolongation and increase in intensity of this conflict could turn it into a serious supply shock, comparable to what followed the start of the war in Ukraine in 2022. Similar to this episode, this shock would have negative consequences on inflation and the country's economic growth in the future," the governor added.
Like central banks around the world, the Bank of Albania believes that keeping monetary policy unchanged allows more time to monitor the performance of oil prices in international markets and to assess their impact on the country.
But Sejko said that the Bank's Supervisory Council will carefully and continuously monitor the situation and, based on developments in the situation, it remains ready to react in a timely, appropriate manner and with the appropriate force, to any material risk to price stability.
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