December 21, 2016 / 5:33 PM / in 2 years

Albania central bank holds rates, vows stimulus into mid-2017

TIRANA, Dec 21 (Reuters) - Albania’s central bank held its key benchmark rate at the historic low of 1.5 percent on Wednesday and pledged monetary stimulus until at least mid-2017, its governor Gent Sejko said.

The bank also kept its overnight deposit and lending rates on hold at 0.25 percent and 2.25 percent respectively, Sejko said, adding that the decision was “sufficient” for reaching the bank’s inflation target.

“Based on the expected developments and associated risks, the Supervisory Board believes the intensity of monetary stimulus will not die down before the second half of 2017,” Sejko told reporters after a session of the board.

The central bank sees growth improving over the next two years, he said, fuelled by a revival of private demand as the government consolidates fiscal policy amid continuing “weakness and uncertainty” in key trade partners Italy and Greece.

Albania has approved a budget for 2017 envisaging 3.8 growth in gross domestic product, compared with 3.4 percent in 2016.

The impoverished, formerly communist Balkan country has managed to revive its growth rate since the 1.1 percent registered in 2013, but is struggling to match the average of 5.5 to 6 percent achieved between 2000 and 2009.

Sejko said that data showed “economic activity is improving, inflation rising gradually to its target, and a financial environment favourable for helping us reach our goals.

“In line with these forecasts, economic activity is expected to return to its balance within 2017 and inflation ... to return to its target in 2018,” he said.

The bank previously said it would clinch its target of 3 percent inflation in mid-2018. Annual inflation in November was 1.9 percent, up 0.4 percent from October, Sejko said.

He said he expected the government to maintain its policy of fiscal consolidation enshrined in the 330 million euro ($344.19 million) deal with the International Monetary Fund (IMF) due to expire in February.

“The current deal reached its goals ... A new agreement (with the IMF) will have to be decided after the general elections (in June 2017),” Sejko added. ($1 = 0.9588 euros) (Reporting by Benet Koleka; editing by Mark Heinrich)

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