lv
Created on 12.07.2012

In view of the fact that risks for price stability in the medium term are limited and inflation continues to go down as well as the expected negative influence of the European debt crisis on the Latvian economy, the Bank of Latvia council today resolved to reduce all interest rates set by the Bank of Latvia:

  • the Bank of Latvia refinancing rate from 3.5% to 3.0%;
  • the bank overnight deposit facility with the Bank of Latvia interest rate from 0.25% to 0.1%;
  • the bank seven-day deposit facility with the Bank of Latvia interest rate from 0.375% to 0.125%;
  • the marginal facility interest rates:
  • for the facility used no more than for five working days in the previous 30 days from 5.0% to 4.0%,
  • for the facility used no more than for 10 working days in the previous 30 days from 10.0% to 7%,
  • and for the facility used for more than 10 working days in the previous 30 days from 15% to 10%.

The easing of the monetary policy conditions conducted subsequent to the lowering of some rates in March will provide the banks with an additional stimulus to direct available lats resources for economic development. The new lending facility interest rates will be applied to banks as of 24 July 2012. The mandatory reserve requirement set for the banks has not been changed.

In its mid-year meeting, the Bank of Latvia reviewed the economic growth projections. Albeit the growth of the economy will be more rapid than predicted at the beginning of the year, uncertainty and risks remain high primarily determined by the unstable situation in the European countries facing the debt crisis. Stronger than expected external demand with the reinforced competitiveness permitted also the participants of the Latvian economy to maintain a positive outlook for the future and achieve a more rapid economic growth at the beginning of the year. With that in view, the projected GDP growth for the year overall has been raised from 1.3% to 3.5-4.0%, which will have to be considered as relatively good development against the overall background in Europe. It must be taken into account, however, that the debt crisis in Europe has not been solved and it has been factored in into this reviewed forecast that the slowdown in the external demand expected at the beginning of the year has been delayed for the second half of the year.

The Bank of Latvia's inflation projections for 2012 remain unchanged: 2.4% annual rise for consumer prices.

The Report of the Governor of the Bank of Latvia, Ilmārs Rimšēvičs, at today’s press conference will be available in the news section of the Bank of Latvia’s home page www.bank.lv .

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

 

In effect as of

% per annum

Bank of Latvia refinancing rate 

24.07.2012.

3.0

Bank of Latvia marginal lending facility rate to banks that have used the facility no more than 5 working days within the previous 30 day period

24.07.2012.

4.0

Bank of Latvia marginal lending facility rate to banks that have used the facility no more than 10 working days within the previous 30 day period

24.07.2012.

7.0

Bank of Latvia marginal lending facility rate to banks that have used the facility more than 10 working days within the previous 30 day period

24.07.2012.

10.0

Bank of Latvia overnight deposit facility rate

 

24.07.2012.

0.1

Bank of Latvia 7-day deposit facility rate

24.07.2012.

0.125

The refinancing rate is one of the major interest rates set by the Bank of Latvia, which has an impact on the interest rate on lats resources offered by the Bank of Latvia in main refinancing operation tenders and hence also affects the interest rates on Latvia's money market. Credit institutions can also make use of standing facilities of lending and depositing of funds - borrow funds in lats from the Bank of Latvia against a securities collateral with overnight maturity and deposit funds in lats with the Bank of Latvia with an overnight and a 7-day maturity.