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Bank of Latvia

Interest rates on loans to and deposits of domestic enterprises and private persons were steady in the first quarter. Influenced by global trends, interest rates of transactions in the currencies of the OECD countries fell.

The weighted average interest rate on short-term loans in lats to domestic enterprises and private persons was slightly below the previous quarter's level (12.5%-13.1%), and that of long-term loans in lats was within a range of 9.6%-10.2% (see Chart 13). Compared with the first quarter of 2000, the weighted average interest rate of short-term loans in lats rose by 2.9 percentage points, while that of long-term loans in lats dropped by 1.2 percentage points. With the country's macroecnomic position improving and bank competition escalating, the weighted average interest rate of long-term loans in lats continued to fall.

Chart 13

Weighted Average Interest Rates on Loans in Lats

(%)

  Short-term
  Long-term


In the first quarter, the weighted average interest rate on loans in the currencies of the OECD countries dropped significantly, reflecting the decrease in the Federal Reserve System's federal funds rate and a decline in interbank market rates in Latvia and other countries. The weighted average interest rate of short-term loans in the currencies of the OECD countries decreased by 1.5 percentage points compared with the previous quarter and by 2.6 percentage points compared with the first quarter of 2000. The weighted average interest rate of long-term loans in the currencies of the OECD countries decreased by 0.9 percentage points and 1.5 percentage points, respectively. The weighted average interest rate of short-term loans in lats was higher than that of similar loans in the currencies of the OECD countries, but the weighted average interest rate of long-term loans in lats did not differ significantly from that of similar loans in the currencies of the OECD countries.

The weighted average interest rate of short-term loans in lats to domestic enterprises was within a range of 12.3%-13.0%, but that of similar loans to domestic private persons ranged from 14.8% to 16.5%. The weighted average interest rate of long-term loans in lats was 9.3%-9.9% on loans to domestic enterprises and 11.4%-11.7% on loans to domestic private persons.

In the first quarter, the weighted average interest rates of short-term and long-term deposits received in lats from domestic enterprises and private persons were 4.6% and 7.1%, respectively (for monthly changes in weighted average interest rates, see Chart 14). The weighted average interest rate of short-term deposits in lats rose by 0.6 percentage points compared with the first quarter of 2000 and by 0.2 percentage points compared with the previous quarter. This confirms a moderate upward trend of interest rates, along with escalating bank competition. No quarter-on-quarter changes were observed in the weighted average interest rate on long-term deposits.


Chart 14

Weighted Average Interest Rates on Deposits in Lats

(%)

Short-term
Long-term

In the first quarter, the weighted average interest rates of short- and long-term deposits in the currencies of the OECD countries dropped by 0.6 and 1.0 percentage points, respectively. The analysis of the weighted average interest rates of deposits in lats and the currencies of the OECD countries revealed that, with interest rates of short-term deposits in the currencies of the OECD countries decreasing and those of short-term deposits in lats increasing, the spread between interest rates of deposits in these currencies has narrowed. At the same time, for long-term deposits, interest rates of deposits in lats are higher than those of deposits in the currencies of the OECD countries. This stimulates banks to attract long-term loans in lats.