The Bank of Latvia Council resolved today to leave the interest rates of the central bank (i.e. refinancing, overnight lending facility and overnight deposit facility) unchanged. The minimum reserve requirement and calculation procedure are also to remain unchanged.

Taking into account the fact that the demand side’s reaction is slow and that the influence of supply factors on inflation are going to remain substantial, a slowdown in the growth of core inflation is not expected. A stricter fiscal and other anti-inflation measures have more of a medium to long term character, therefore speedy changes in the price dynamics of consumer goods and services cannot be reasonably expected. The prediction of average annual inflation for 2007 has been adjusted to about 10% and the average annual inflation for 2008 is expected at about 13%.

In August and September, the tendency for the economy to slow down, which was observed in previous months, held true: the annual lending rate decreased to the lowest level since September 2004; increase in retail trade slowed substantially; real estate market and construction cooled down. We predict the GDP growth for 2008 settling at about 7%, which is a sustainable level in the long term; this year it will still be a little above 10%.

We have to keep in mind, however, that any predictions made at a time of economic change and under conditions of such a substantial influence from external factors, are approximate and may have to be adjusted.

The interest rates set by the Bank of Latvia remain as follows:

  • refinancing – 6.0% per annum;
  • overnight deposit facility – 2.0% per annum;
  • overnight lending facility – 7.5% per annum.

The refinancing rate was last raised on 18 May 2007 by 0.5 percentage points to 6.0%. The minimum reserve requirement for banks and branches of foreign banks has been 8% since 24 December 2005.

The Bank of Latvia Council approved the "No. 8 Amendments to the Bank of Latvia Regulation of 13 September 2007, the "Regulation for the Credit Register"". On 27 September 2007, the Saeima adopted amendments to the law on the compulsory insurance of third person liability of land vehicle owners that obliges the Latvian Bureau of Transport Vehicle Insurance to share information with the Credit Register. Thereby the bureau will become a separate participant in the Credit Register. For the same reason the "No. 9 Amendments to the Bank of Latvia Regulation of 13 September 2007, "Regulation for the Payments and Procedure Thereof by the Participants of Credit Register for Use of the Credit Register"" have also been approved (both documents will take effect on 1 January 2008).

The Bank of Latvia Council approved "The Technical Regulation of the Credit Register” (to take effect on 1 January 2008). The Regulation will provide for the content of the information to be shared and list the cases in which a certain piece of information must be released and also provide for the procedure for electronic preparation, submitting and delivering of information, including the description of file formats and procedure for registering the persons authorized by the register participants.