March 27, 2014 / 5:51 PM / 5 years ago

Albania holds rates at record low, call on banks to lend

* Bank says to maintain monetary stimulus

* Governor urges banks to lend more

* Bank says annual inflation in February was 1.9 pct

TIRANA, March 27 (Reuters) - Albania’s central bank held its benchmark rate at the record low of 2.75 percent on Thursday, promising to keep easing monetary policy and calling on banks to lend more.

“Monetary policy will continue to preserve its stimulus for the coming period, and this would ensure the right monetary conditions to respect our goal for inflation in the medium term,” Central Bank Governor Ardian Fullani told reporters.

Speaking after the central bank’s monthly rate-setting meeting, Fullani said annual inflation in February was 1.9 percent, rising slightly against January’s reading.

The rise was to due higher prices of agricultural produce, higher water tariffs in some districts and third party liability insurance for cars, Fullani said. The bank aims to keep inflation in the 2 to 4 percent range in 2014.

To stimulate lending and the economy, the central bank has cut its key benchmark one-week reverse repo rate by a cumulative 250 points since mid-2011 to reach 2.75 percent last month.

However, lending to the private sector saw a 1.4 percent year-on-year drop in January, reflecting both weak demand and added caution by banks, he said.

New data backed the central bank’s view the economy would pick up gradually in the coming quarters thanks to the stimulus, the payment of $350 million dollars of government arrears and the improvement of the investment climate.

Growth last year was expected to be just 0.7 percent.

“I deem it appropriate to stress the Bank of Albania (Central Bank) expects a better reaction from the banking system towards lending,” Fullani said. (Reporting by Benet Koleka; Editing by Alison Williams)

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