The recent surge in inflation has increased consumers' concerns about rising prices, while businesses and financial agents have been less affected.

According to the Bank of Albania's surveys, in the second quarter of this year, consumers' expectations for inflation after one year increased significantly to 11.5%, 2.3 percentage points higher than in the first quarter.

According to the Bank of Albania, consumers' expectations for inflation have reflected the increase in inflation perceived by them during the second quarter.

Meanwhile, the short-term expectations of businesses and financial agents remain near the 3.0% target during the second quarter of 2026. Specifically, these agents expect inflation after one year to be 3.2% and 3.1%, respectively.

For the medium-term horizon (two to three years), financial agents' expectations have remained stable for about a year, close to the 3% level. Meanwhile, businesses' expectations for the same period result in 3.4 and 3.8%, marking a downward revision compared to the previous quarter.

Since March of this year, the economy has been facing an increasing inflation trend, caused especially by the geopolitical crisis in the Middle East and the increase in crude oil prices. According to INSTAT data, inflation reached 3.4% in July, touching the highest level in two and a half years.

Meanwhile, core inflation, which excludes food and energy prices, reached 3.54% in June, the highest level since 2023.

Although inflation has increased above the Bank of Albania's target, the latter has not reacted so far with an increase in the base interest rate. Governor Gent Sejko argued this position with the belief that the wave of inflation will be temporary, but also with the tightening nature of fiscal policy and the further strengthening of the Lek in the exchange rate. The conflict in the Middle East that has caused a significant increase in fuel prices, however, remains very difficult to predict, and at the moment it does not seem that there will be a quick solution on the horizon.

As for core and domestic inflation, the Bank of Albania believes that its increase above the target is being caused mainly by rental prices.

However, the Bank of Albania acknowledged in the latest statement after the Supervisory Council meeting that sustained inflation above the target could lead to an increase in inflationary expectations in the economy and generate longer-term pressures for price increases.

The rising inflation trend has already been reflected in consumers' inflationary expectations, while businesses still do not seem too concerned and have not shifted their expectations upwards, Monitor reported on Tuesday.