Inflation reaches 3% in May/ Rate touches Bank of Albania's target, prices continue to rise
Inflation in Albania rose to 3% in May, reaching the Bank of Albania's target level and signaling increasing price pressures in the economy. Data published by INSTAT show that the annual inflation rate rose from 2.8% in April to 3% in May, the highest level in recent years, reflecting the consequences of the Middle East War.
Although compared to April, consumer prices marked a slight decrease of 0.04%, in annual terms they continue to increase, driven mainly by transportation, energy and housing costs.
The group with the strongest price increase remains transportation, with an annual increase of 7.8%, while insurance and financial services became more expensive by 4.9%. Likewise, the group "Rent, water, electricity, gas and other fuels" and "Entertainment, sports and culture" recorded an increase of 4.2%, while food and non-alcoholic beverages increased by 2.2% compared to a year earlier.
According to INSTAT, the greatest impact on total inflation was provided by rents, water, electricity, gas and other fuels, with 0.84 percentage points, followed by food and non-alcoholic beverages, with 0.76 percentage points, and transportation, with 0.51 percentage points.
The increase in inflation to 3% comes at a time when the Bank of Albania has stated that its objective is to stabilize inflation around this level. However, the persistence of inflation near or above the target may increase expectations that the central bank will consider tightening monetary policy, through an increase in the key interest rate, if price pressures prove more sustainable.
Currently, the base interest rate is at 2.5%, while future decisions by the Bank of Albania are expected to depend on the performance of inflation and developments in the domestic economy and international markets.
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