Friday, November 18, 2011

Central Bank of Latvia Holds Refinancing Rate at 3.50%

Latvijas Banka held its main monetary policy interest rate, the refinancing rate, unchanged at 3.50%, and held its other interest rates unchanged.  The Bank said: "As the global prices of energy resources and food are stabilizing and assuming that the Government will refrain from raising any taxes, a substantial drop in inflation can be predicted for next year. 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 the 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 September meeting.  The Bank of Latvia last reduced the refinancing rate by 50bps to 3.50% in March 2010.  Latvia reported annual inflation of 4.4% in October, down from 4.6% in September, and 4.7% in August.  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 Latvian currency, the lat (LVL), last traded around 0.519 against the US dollar.


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