Latvijas Banka kept its main monetary policy interest rate, the refinancing rate, unchanged at 3.50%, and held its other interest rates unchanged. The Bank said:"In recent months the trend of abating inflation has become evident with only the raising of several tax rates preventing a more rapid drop in prices,". The Bank further noted that "domestic demand is growing slowly and represents no risk of rising prices; moreover it is becoming likely that economic growth in Latvia will be slower next year as demand in external markets drops because of the global debt crisis."
Previously the Bank also kept monetary policy settings unchanged, leaving the refinancing rate at 3.50% at its July meeting. The Bank of Latvia last reduced the refinancing rate by 50bps to 3.50% in March 2010. Latvia reported annual inflation of 4.7% in August, compared to 4.3% in July, 5% in May, and 4.5% in April. The Latvian economy expanded 5.6% on an annual basis in Q2, while GDP growth was reported as 3.5% in the previous quarter. The Bank next meets on the 15th of November.