Monday, November 11, 2013

Latvia slashes rate 125 bps to 0.25% on no risk to inflation

    Latvia's central bank slashed its refinancing rate by 125 basis points to 0.25 percent, mirroring the European Central Bank's (ECB) benchmark rate, saying the rate was cut because "inflation indicators remain low in Latvia and the rate at which the economy develops does not pose risks to price stability in the medium term."
   Latvia will be come the 18th nation to adopt the single currency, the euro, on January 1, 2014.
   The Bank of Latvia, which cut its rate by 50 basis points in July and September, has now cut rates by a total 225 basis points this year.
    The central also cut the varying rates on its marginal lending facilies. The rates vary depending on how long banks draw on the facility. For example, if a bank uses the facility for a maximum five days within the last 30 days, the rate will be cut to 0.75 percent from 2.0 percent.
    The new rates will take effect on Nov. 24 and the overnight deposit rate was held steady at 0.05 percent.

    Latvia's inflation rate was zero in October, up from negative rates of 0.4 percent in September and 0.2 percent in August. In July the central bank cut its inflation forecast for this year to 0.7 percent. In 2012 Latvia's inflation rate was 2.3 percent.
    Latvia's Gross Domestic Product expanded by 1.2 percent in the third quarter from the second for annual growth of 4.2 percent, slightly down from 4.3 percent.
    In July the central bank raised its growth forecast for 2013 to 4.1 percent, down from 5.6 percent in 2012.


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