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On Resolutions Passed by the Bank of Latvia's Council

 Press Release of September 7, 2006

At its September 7 regular meeting, the Bank of Latvia's Council resolved to leave unchanged the refinancing rate and interest rates on bank deposits with the Bank of Latvia and Lombard loans, as well as the minimum reserve ratio and its calculation procedure.

Latvia's inflation remains high and a growing number of signs point to the inflation being fuelled by the strong domestic demand, also adversely affecting other macroeconomic indicators and posing a threat to the long-term economic development. One of the main drivers of consumption remains the active lending policy implemented by banks. Nevertheless, there is a reason to believe that the lending growth could decelerate soon, as a result of, inter alia, the recent monetary policy tightening measures taken by the Bank of Latvia, and the European Central Bank raising the euro rates.

It has to be noted that the oil market tensions, unfavourable weather conditions for agricultural production prevailing across all Europe, potential changes in administered prices due to growing energy costs are the near-term risks that may warrant a revision of the Bank of Latvia's inflation forecast for 2006 (currently at 6%).

We remind that the current interest rates set by the Bank of Latvia are as follows:
- the refinancing rate - 4.5% per annum;
- the interest rates on bank deposits with the Bank of Latvia:
         - 2.0% per annum for 7-day deposits,
         - 2.25% per annum for 14-day deposits;

- the interest rate on Lombard loans:
        - 5.5% per annum for loans with maturity of up to 10 days,
        - 6.5% per annum for loans with maturity from 11 to 20 days,
        - 7.5% per annum for loans with maturity 21 days and more.

The refinancing rate and the interest rates on Lombard loans are effective as of 15 July 2006, whereas the bank deposit rates as of 16 September 2002.

As of 24 December 2005, the reserve ratio for banks and branches of foreign banks is 8%.