Bank of Albania will buy foreign currency in order to reduce the excess supply of the euro in the market, enabling the strengthening of the lek. On the other hand, BoA reduced the base interest rate in order to increase the supply of the lek in the market
The value of the Euro will not be allowed to drop any further. The state has finally decided to react. This was confirmed yesterday by the governor of the Bank of Albania, Gent Sejko. According to Sejko, the value of Euro is no longer within the normal values, therefore this institution is obliged to intervene in the market. Sejko also mentioned the threat of this phenomenon on the stability of prices in the country and the threat that it posed on other areas too, had it continued at such pace. “The strong appreciation may give rise to a vicious circle which could have a damaging effect on inflation and other economic indicators”, the Bank of Albania declared. This way, the central banking authority has decided to put a stop to this phenomenon. But how will it manage to do this in practical terms?
One way is to buy the foreign currency in the domestic currency market. “By buying the currency, we will aim to eliminate the temporary excess of the amount of the currency in the market and stop further strengthening of the domestic currency”, governor Sejko said. Meanwhile, the head of the central banking authority said that these measures will last for as long as it’s needed not to allow destabilization of prices and the country’s economy in general. However, the bank has declared that this measure is a special one taken under specific measures which have recently emerged due to the excessive appreciation of the domestic currency. Let us recall that in the recent days, the euro has been sold at 124 lek. The last time the euro dropped to this kind of level was ten years ago. On the other hand, the second practical measure that the central bank applied was the reduction of the basic interest rate for the domestic currency. The base interest rate was cut by 0.25% going down to 1%.