Albania Holds Policy Rate at 2.5%

The Bank of Albania kept its policy rate unchanged at 2.5% on December 17, marking the fourth consecutive meeting pause. The overnight lending and deposit rates were also held steady at 3.5% and 1.5%, respectively. The economy maintained steady growth in the second half of 2025, driven by robust consumption, investment, and service exports, with tourism as a notable contributor. Inflation remained well-contained, with the CPI averaging 2.2% in October–November, slightly below third-quarter levels, as food, energy, and housing price pressures eased, while core inflation held steady at 3.1–3.5%. Unemployment rate eased to a one-year low of 8.1% in Q3 2025. Looking ahead, inflation is expected to return to the 3% target by Q2 2026, with risks broadly balanced between potential upward pressures from geopolitical tensions and downside risks from slower growth among key trading partners.

The Bank of Albania kept its policy rate unchanged at 2.5% on November 5, marking the third consecutive monthly pause, with overnight lending and deposit rates steady at 3.5% and 1.5%, respectively. Non-harmonized inflation averaged 2.4% in Q3 2025, edging up from the prior quarter yet staying below the 3% target, driven by rising rents and higher services prices, while food inflation eased. Inflation is expected to reach the target in H1 2026. The economy remained strong, with GDP growing 3.6% in the first half of the year, supported by higher household consumption, private investment, and services exports. Employment and wages also increased, while the unemployment rate fell to a historic low of 8.5%. However, trade tensions and geopolitical risks pose downside pressures, and labor market tightness coupled with rapid wage growth could push inflation above forecasts.

The Bank of Albania held its policy rate at 2.5% on October 1, marking the second consecutive monthly pause. Overnight lending and deposit rates remained at 3.5% and 1.5%. GDP grew 3.5% year-on-year in Q2, slightly below 3.7% in Q1, supported by domestic demand, investment, and tourism, while weaker exports and rising imports weighed on growth. Inflation in July and August reached 2.4%, slightly above 2.3% in Q2, mainly due to rising rents and stable oil prices. Labor market conditions remain strong, with employment up 3.4%, private sector wages rising 9.5%, and unemployment at 8.5%. Credit growth of 14%, low non-performing loans, and a diversified loan structure continue to support the economy. The central bank said domestic inflationary pressures are moderate, imported pressures low, and financial conditions accommodative, though external uncertainties and commodity price volatility warrant caution.