Arjan Kadare, former member of the Supervisory Council at the Bank of
Albania, said that a further lowering of the interest rate will help the
economy, but he warns that the Central Bank is exhausting its
instruments to fight the crisis.
“The monetary limiting policy is getting closer to Albania too. In normal conditions, when the interest rates are low, the monetary policy is not very efficient to stimulate an aggregate request. This is said by all economic theories”, Kadare says.
The Bank cannot reduce the interest rate under zero. If the economy will need more encouragement, it will have to raise the debt.
“This situation needs short-termed stimulus, without compromising the government’s agreement with the IMF to put the economy into motion, together with employment and consumption”, Kadare said.
Critics think that the monetary policy has not been powerful enough, and the interest rate reduction did not have any effect in the economy. But Kadare has another opinion.
“Certainly, we compare the situation with what we wanted it to be. The other question is “where would we have been if the Central Bank had not done this?”, Kadare says.
The Bank of Albania reduced the interest rate for the 15th consequent time, bringing it to the new historic minimum of 1.5%.
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