According to the information of the Bank of Albania, the core inflation decreased to 2.19%, from 2.32% that had been in the month of September. Also on an annual basis, core inflation remains in significant decline.

In the same period last year, the basic inflation marked the level of 3.67%. With the further decline in October, the core inflation approached the historical average level of 2.2%.

Core inflation is calculated by the Bank of Albania for a group of goods and services that account for 69% of the share in the general basket of the Consumer Price Index. Core inflation excludes those products that usually have high volatility, mainly food and energy products.

The purpose of calculating core inflation is to strip the overall increase in prices from fluctuations of a shorter-term nature. In particular, core inflation is related to internal inflationary pressures, which in recent years have been greatly influenced by the increase in the labor costs of businesses.

Core inflation remains slightly higher than the average inflation in the economy, but in general, it has followed its downward trend. According to INSTAT, for October inflation decreased to 1.9%, remaining the lowest level in more than three years.

In the analysis of the central bank, the rapid decline in inflation during 2024 has reflected, to the greatest extent, the decline in imported inflation. In parallel, the inflation generated by internal economic developments has been decreasing, but this decrease has been slower, and internal inflationary pressures are close to their long-term averages.

The Supervisory Council of the Bank of Albania decided last week to lower the base interest rate from 3% to 2.75%. This was the second reduction of the base rate for this year after the first reduction was decided at the beginning of July.

The Bank of Albania motivated this decision with the greatest short-term risks of a further drop in inflation below the target, confirming its projection for a return of inflation close to the target of 3% next year. According to the Bank of Albania, internal inflationary pressures are close to long-term average levels.

Domestic inflation in the economy was around 2.1% in the third quarter, from 2.3% a quarter earlier. The Bank of Albania notes, however, that the effect of the exchange rate is not only reflected in the inflation of imported goods. She estimates that both internal inflation and core inflation reflect, albeit to a lesser extent, the impact of the strengthening of the lek exchange rate.