The Bank of Latvia, which cut its rate by 100 basis points last year, forecast inflation in 2013 of 2.0 percent and economic growth of 3.6 percent, mainly due to external risks and delayed investments.
In 2011 Latvia's Gross Domestic Product expanded by 5.5 percent but the economy slowed down in 2012 and was forecast by the International Monetary Fund to grow by 4.5 percent in 2012.
In the third quarter, Latvia's GDP expanded by 1.7 percent from the second quarter for annual growth of 5.2 percent, up from 5.0 percent in the second quarter.
Latvia's inflation rate in December was steady at 1.6 percent, a low for the year, and unchanged for the last three months. In 2011 consumer prices rose 4.2 percent.
The Bank of Latvia aims for price stability but does not have an actual inflation target.