UPDATE 1-Albania cuts key rate to record 3.75 pct to spur growth

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By Benet Koleka

TIRANA Jan 30 (Reuters) - Albania's central bank cut its benchmark interest rate on Wednesday for the first time since July, trimming it a quarter percentage point to a record low of 3.75 percent to stimulate growth.

Albania has avoided the recession that has struck much of the western Balkans, but average growth rates of more than 5 percent over the last decade have been halved by the spillover from the euro zone crisis, particularly in neighbouring Greece and Italy.

Gross domestic product grew 2.7 percent in the third quarter of 2012 and central bank Governor Ardian Fullani said he expected similar growth in Q4.

"Through this monetary easing, the bank aims to increase consumption and lending to the economy," Fullani told reporters after a meeting of the bank's board.

To revive a sluggish economy, the bank had cut its benchmark rate by 125 basis points between September 2011 and July last year.

The lek rate affects about 30 percent of lending by commercial banks in Albania as the rest is in hard currency, mostly in euros.

Fullani said he saw little pressure on inflation, which he said would stand at between 0.8 and 3.8 percent over the next year.

He said consumption was up over the last quarter of 2012, but private investment continued to lag.

"Growth has been backed by the services sector, industry and agriculture while construction is shrinking," Fullani said.

"Internal demand remains sluggish due to low consumption and a low level of investment in the private sector." (Editing by Stephen Nisbet)