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Press release of May 19, 2005


At its May 19 regular meeting, the Bank of Latvia's Council resolved to leave the refinancing rate and interest rates on bank deposits with the Bank of Latvia and Lombard loans unaltered. The minimum reserve requirement for banks will also remain unchanged.

The resolution is based on the following economic development considerations. Inflation remains higher than forecast and, without implementing specific measures to diminish inflation, Latvia's economic growth may decelerate in comparison with the previous year.

Domestic demand remains strong under the impact of persistently rapid development of lending . This prevents inflation and Latvia's high current account deficit from shrinking to any significant extent.

While it is true that after pegging the lats to the euro and Latvia joining ERM II the role and effectiveness of monetary policy instruments has substantially decreased, the Bank of Latvia remains ready to do its utmost to support balanced economic development.

The current interest rates set by the Bank of Latvia are as follows:
- the refinancing rate - 4.0% 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 rates on Lombard loans:
- 5.0% per annum for loans with maturity of up to 10 days,
- 11.-20. - 6.0% per annum for loans with maturity from 11 to 20 days,
- 7.0% per annum for loans with maturity 21 days and more.

The minimum reserve requirement set by the Bank of Latvia is 4%.

The Council of the Bank of Latvia made amendments to the "Regulation for the Securities Settlement System Organized by the Bank of Latvia". This decision was taken in the context of reorganising the primary market for Latvian government securities, disbursements of interest income and redemption of these securities, and it will come to effect together with Regulation of the Cabinet of Ministers of the Republic of Latvia governing the procedure for issuing Latvian government securities.

"Regulation for the Securities Settlement System Organized by the Bank of Latvia" governs the operation of the securities settlement system established by the Bank of Latvia and is only binding to those participants of the system who have signed a voluntary agreement with the Bank of Latvia "On Participation in the Securities Settlement System Organized by the Bank of Latvia".