Albania's central bank holds rates as inflation climbs and property prices surge

The Bank of Albania's supervisory council kept the base interest rate unchanged at 2.5%, with the deposit rate at 1.5% and the loan rate at 3.5%, saying the current monetary stance remains suitable to steer inflation back to target.

Consumer price inflation rose to 2.9% in April‑May, driven mainly by higher fuel and food prices, while rent inflation fell. The bank expects a temporary overshoot above the 2% objective in the second half of the year before inflation returns to the medium‑term target.

Albania's economy expanded 3.7% in the first quarter, supported by household consumption, private investment, services and construction. Private‑sector credit grew 13.8% in May, with a large share of bank lending tied to real‑estate purchases.

Analysts warn that house‑price growth has far outpaced wage growth: average home prices rose 44.5% year‑on‑year (56% in Tirana) while average gross wages increased only 9.8%. Foreign direct investment in 2024 was channeled largely into real estate, representing about a quarter of total FDI, and roughly half of the banking sector’s loan portfolio is linked to property, raising concerns about the sustainability of the growth model.