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Press release of January 13, 2005

At its January 13 regular meeting, the Bank of Latvia's Council resolved to leave unaltered the refinancing rate and the interest rate on bank deposits with the Bank of Latvia and Lombard loans.

Latvia's economy continues to develop buoyantly, and sufficiently rapid growth can be expected this year as well, implying that several macroeconomic risks will persist. With several one-off factors disappearing, the average inflation could decline to 4.5%-5% in 2005; nevertheless, it will still remain above the level prevalent before 2004. The impact of those one-off factors determining the high current account deficit of the previous year will also abate, although it is most likely that no significant reduction of the current account deficit can be expected considering that the domestic demand remains strong.  

The Government's fiscal policy, especially after pegging the lats to the euro, becomes the main instrument for stabilising the above risks. Taking into account that the vigorous economic growth is expected to continue this year (we forecast a 7.5% GDP growth), the Bank of Latvia urges the Government to secure a lower fiscal deficit than in the previous year.

The Bank of Latvia will continue to carefully monitor the macroeconomic situation in Latvia and will consider and use opportunities to implement adequate measures, if required. At today's meeting, the Bank of Latvia made no adjustments to the monetary policy.

We remind that 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 rate on Lombard loans:
                        - 5.0% per annum for loans with maturity of up to 10 days,
                        - 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 Bank of Latvia's Council approved the "Regulation for Reproducing the Bank of Latvia Banknotes" (will take effect on February 1, 2005).

According to the Republic of Latvia's "Copyright Law", any reproduction of the Bank of Latvia's banknotes is prohibited, except  where the Bank of Latvia has provided a written permission or the requirements of the Bank of Latvia for the reproduction of banknotes have been met.

The approved Regulation or requirements list the criteria for reproducing the Bank of Latvia's banknotes to be observed when fully or partly depicting the lats banknotes or coins in any type of reproductions (printed, electronic or on spatial objects, e.g., in advertising or informative materials). Provided that these criteria are met, the reproducer does not need a special permission from the Bank of Latvia to reproduce the banknotes. The Regulation will be available on the Bank of Latvia's Website at www.bank.lv in section "Latvian Money".

The Bank of Latvia's Council resolved to revoke the Resolution "On Approval of 'Regulation for Receiving a Cash Collection Licence'" (in effect as of the moment of adoption). This Resolution has been made on the basis of analysis carried out by the Bank of Latvia and the Ministry of Interior working group, and it stipulates that cash collection will no longer require a separate licence as it is one of the security service activities requiring a licence under the "Security Services Activity Law". 

According to this Law, such licences are granted by the Ministry of Interior. A licence issued by the Ministry of Interior following a set procedure for engaging in the security services activities would also grant the right to engage in cash collection.

The Bank of Latvia's Council approved amendments to several Regulations and statistical reports (in affect as of April 1, 2005), in order to harmonise the terminology applied therein with the "Regulation for Compiling the Monthly Financial Position Report of Monetary Financial Institutions and its Appendices" approved on November 11, 2004. The following documents have been amended :

- "Regulation for Compiling the 'Report on Net Open Foreign Exchange Position'" and "Report on Net Open Foreign Exchange Position";

- "Regulation for Compiling Interest Rate Reports of Credit Institutions" as well as "The Interest Rate Report on New Business", "The Interest Rate Report on Outstanding Amounts" and "The Changes in Items of the Interest Rate Report on New Business";

- "Regulation for Compiling the 'Report on Money Market Transactions'" and "Report on Money Market Transactions";

- "Regulation for Compiling the 'Report on Adjustments in Respect of Write-Offs/Write-Downs of Loans and Price Revaluations of Securities'" and "Report on Adjustments in Respect of Write-Offs/Write-Downs of Loans and Price Revaluations of Securities";

- "Regulation for Compiling the 'Report and Projections on Long-Term Foreign Loans by Credit Institutions'" as well as "Report on Long-Term Foreign Loans " and "Projections on Long-Term Foreign Loans ".