Repegging of the lats and price stability

Many businesses had been expecting this decision already in 1931 when, due to the global economic crisis, the United Kingdom and several other countries ceased pegging their national currencies to gold. This idea was particularly dear to those whom K. Saliņš, caricaturist of the journal "Svari", described as "overcredited speculators" and depicted as an aggressive tomcat with sharp teeth wanting to tear to pieces a small bird symbolising the lats.

France, the Netherlands and Switzerland had already ceased pegging their national currencies to gold in 1936. The "Amendments to the Regulation on Lending" entered into force at 6.00 a.m. on 29 September. Upon its pegging to the British pound sterling, the lats depreciated (one British pound sterling was worth 25 lats and 22 santims). On 13 September 1939, the Government altered the regulation for the lats pegging: Latvijas Banka could set the exchange rate of the lats freely without following the fluctuations in the exchange rate of the British pound sterling if its value, according to the exchange rate on 29 September 1936, declined by more than 5% vis-à-vis the US dollar or the Swedish krona. After the lats devaluation, retail prices for rye bread and milk remained broadly unchanged, while the price for fresh pork increased.

Average retail prices in Latvia (in lats)*

	1930	1934	1937	1938
Rye bread (1 kg)	0.25	0.21	0.20	0.20
Milk (1 l)	0.20	0.11	0.12	0.13
Pork, fresh (1 kg)	1.89	0.93	1.23	1.32

* Statistical yearbook of Latvia, 1939. Riga: Valters un Rapa, 1939, pp. 214–215.