The Supervisory Council of the Bank of Albania decided today to keep the base interest rate unchanged at 2.5%.

Governor Gent Sejko said that the baseline scenario forecasts suggest that the increase in oil and energy prices in world markets will cause a slight and temporary increase in inflation above the target during 2026, as well as a marginal slowdown in the pace of economic growth in the country. Based on these premises, the effects of the shock are expected to be temporary and not leave long-term traces on the country's development trends.

“The update of the baseline scenario forecasts is based on the assumption of a relatively quick resolution of the conflict. The sound initial position of the Albanian economy suggests that the price shock will bring a temporary increase in inflation above the target over the coming quarters. However, this increase is expected to be mild and transitory; with the end of the direct effect of the shock and the control of its indirect effects, inflation is expected to gradually decline towards the target in the medium term. Also, the Albanian economy is expected to maintain positive growth rates over the coming years, close to our estimates of the potential for expansion of economic activity. For the time being, the increase in uncertainty and the increase in the price of oil import bills are expected to have a negative, but only marginal and transitory, impact on the economic growth indicator in 2026,” said Sejko.

However, he stressed that the military conflict and geopolitical tensions in the Middle East remain a source of risk and uncertainty for the global and Albanian economies.

"Its impact on the economy and inflation will depend significantly on the duration and intensity of the conflict, shifting the balance of risks to the upside for inflation and to the downside for economic growth in the medium term," the Governor said.

Consumer price inflation averaged 2.5% in the first quarter of 2026, registering a slight increase compared to the previous quarter. This performance was dictated by the increase in rent and oil prices, as well as the stabilization of the annual price of electricity for households. On the other hand, the prices of food and other items in the basket had a more stabilized performance.

"The direction of inflation in the first quarter was in line with our expectations and this indicator still remains below target. However, the rapid increase in oil prices in world markets in March immediately had its impact on this month's inflation, illustrating the beginning of its transmission to the Albanian economy."

In macroeconomic terms, the inflation performance over the past quarters has been dictated by increasing domestic pressures and low levels of imported inflation. However, excluding high rent inflation, which is expected to be transitory in nature, domestic pressures remain in line with the price stability objective. On the other hand, low levels of imported inflation have been dictated, to a considerable extent, by the strengthening of the exchange rate. However, the increase in oil prices and its transmission to other items is expected to be accompanied by an increase in imported inflation over the coming quarters,” said Sejko.

The increase in demand for goods and services is reflected in increased employment and wages in the non-agricultural private sector, and in an unemployment rate of 8.3%, which also constitutes the historical minimum level of this indicator in the post-transition period.

However, Sejko said that the relatively rapid increase in wages has not been transmitted to an increase in consumer prices, as a result of its partial absorption by increased productivity and the decline in the profit margin of businesses per unit./ Monitor