The inflation rate in AL has moderated slightly to 2.30% YoY in November 2025, continuing a pattern of mild fluctuations around the 2.30%-2.50% range observed since mid-2025. This level remains above the 2025 Q1 average of 2.00%, reflecting persistent but contained price pressures. The current inflation rate is below the central bank’s 2.50% target, suggesting some easing in cost pressures but still requiring vigilance.

Drivers this month

• Shelter costs contributed 0.15 percentage points (pp) to inflation.
• Energy prices declined, subtracting -0.10 pp from the headline rate.
• Food prices remained stable, with negligible impact on the monthly change.

Policy pulse

The 2.30% inflation rate sits just below the central bank’s 2.50% target, indicating a mild easing from October’s 2.40%. Monetary policy remains accommodative but cautious, with no immediate rate hikes expected. The central bank is likely to monitor inflation closely for signs of acceleration before adjusting policy.

Market lens

Immediate reaction: The ALL currency depreciated 0.30% against the USD within the first hour post-release, reflecting market disappointment at the slightly lower-than-expected inflation print. Short-term bond yields fell by 5 basis points, signaling reduced inflation risk premiums.

Core macroeconomic indicators provide context for the inflation reading. AL’s GDP growth for Q3 2025 was 3.10% YoY, a modest slowdown from 3.40% in Q2. Unemployment remains low at 4.20%, supporting steady consumer demand. Wage growth has moderated to 3.00% YoY, aligning with the contained inflation environment.

Monetary Policy & Financial Conditions

The central bank’s benchmark interest rate remains at 3.25%, unchanged since August 2025. Financial conditions have tightened slightly due to global rate hikes but remain accommodative domestically. Credit growth is stable at 6.50% YoY, supporting consumption and investment.

Fiscal Policy & Government Budget

Fiscal policy remains expansionary, with a 2025 budget deficit projected at 3.80% of GDP. Government spending on infrastructure and social programs is supporting demand but is balanced by moderate revenue growth. The fiscal stance is unlikely to add inflationary pressure in the near term.

Drivers this month

• Energy price decline (-0.10 pp) due to easing global oil prices.
• Shelter costs (0.15 pp) remain a steady upward force.
• Stable food prices, with no significant monthly change.

Market lens

Immediate reaction: The ALL/USD exchange rate weakened by 0.30%, while 2-year government bond yields dropped 5 basis points, reflecting market expectations of a steady monetary policy stance amid contained inflation.

Looking ahead, inflation in AL faces several potential trajectories. The baseline scenario (60% probability) projects inflation holding near 2.30%-2.50% through Q1 2026, supported by stable energy prices and moderate wage growth. The central bank is expected to maintain current rates under this scenario.

Bullish scenario (20% probability)

Stronger-than-expected wage growth and renewed supply chain disruptions could push inflation above 2.70%, prompting a cautious rate hike by mid-2026. This would tighten financial conditions and weigh on consumer spending.

Bearish scenario (20% probability)

Global commodity price declines and weaker domestic demand could drive inflation below 2.00%, increasing deflationary risks. This might lead to monetary easing or fiscal stimulus to support growth.

External Shocks & Geopolitical Risks

Geopolitical tensions in key energy-producing regions could cause price volatility, impacting inflation unpredictably. Trade disruptions remain a risk, potentially affecting import prices and supply chains.

AL’s inflation rate of 2.30% YoY in November 2025 reflects a stable but cautious macroeconomic environment. The slight easing from October’s 2.40% suggests inflation pressures are contained but not fully subdued. Policymakers face a delicate balance between supporting growth and preventing inflation from rising above target.

Structural & Long-Run Trends

Long-term inflation in AL has averaged around 2.10% over the past five years, indicating a relatively stable price environment. Structural factors such as demographic shifts, productivity gains, and gradual energy transition will shape inflation dynamics beyond 2025.

Financial Markets & Sentiment

Market sentiment remains cautiously optimistic, with bond yields and currency movements reflecting confidence in stable inflation and steady policy. However, volatility in global markets and geopolitical risks could disrupt this outlook.

Overall, AL’s inflation outlook is balanced with moderate upside and downside risks. Close monitoring of wage trends, commodity prices, and external shocks will be critical for timely policy responses.

Key Markets Likely to React to Inflation Rate YoY

The inflation rate YoY in AL is a key indicator influencing several financial markets. Currency pairs involving the Albanian lek (ALL) often react to inflation surprises, as do local government bonds and equities sensitive to interest rate expectations. Additionally, global commodity-linked assets can be indirectly affected through inflation-driven demand shifts.

• USDEUR – Reflects broader USD strength and risk sentiment impacting AL’s trade and inflation.
• ALBEX – Albanian equity index sensitive to inflation and monetary policy changes.
• ALLUSD – Directly tracks the Albanian lek’s response to inflation data.
• BTCUSD – Bitcoin as an inflation hedge can react to shifts in inflation expectations.
• EURAL – Eurozone stocks with exposure to AL’s economy and inflation environment.

Inflation Rate YoY vs. ALLUSD Since 2020

Since 2020, the Albanian lek (ALL) has shown a moderate inverse correlation with inflation rates. Periods of rising inflation often coincide with lek depreciation against the USD, reflecting concerns over purchasing power. For example, during the 2023 inflation peak of 3.10%, ALLUSD weakened by 4%. Conversely, inflation dips below 2% have supported lek strength. This dynamic underscores the importance of inflation management for currency stability.

FAQ

What is the current Inflation Rate YoY for AL?

The latest inflation rate YoY for AL is 2.30% as of November 2025, slightly below the 2.50% estimate and down from 2.40% in October.

How does the Inflation Rate YoY impact AL’s monetary policy?

Inflation near the 2.50% target supports a steady monetary policy stance, with no immediate rate changes expected unless inflation deviates significantly.

What are the main risks to AL’s inflation outlook?

Key risks include global commodity price shocks, geopolitical tensions, and unexpected wage growth, which could push inflation above or below the baseline forecast.

Takeaway: AL’s inflation rate of 2.30% YoY signals a stable but watchful economic environment, balancing growth support with inflation containment amid external uncertainties.

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.