OREANDA-NEWS. November 10, 2009. The Bank of Latvia Council resolved not to change the interest rates or the reserve requirement set by the Bank of Latvia, reported the press-centre of Bank of Latvia.

Both lending and deposit rates set by the central bank are at a low level following the decisions made in the period between March and May, whereas the minimum reserve ratio was reduced when economic cooling started. It is a precondition for the activity in the lats interbank money market and it provides banks with resources to channel into financing the local economy.

While the macroeconomic imbalances that emerged in the years of economic overheating are progressively easing - inflation has fallen considerabely and the current account has turned into a surplus -, in the near future, growth of financial markets and the real economy will depend on the budget approval process for 2010. The latter should proceed smoothly and at a good speed so as to avoid market strains, outflows of foreign investment and foreign reserves, and substantial fluctuations of the lats interest rates.

The Council of the Bank of Latvia has adjusted the economic forecast for 2009, projecting the annual inflation rate at 3.6%, a 17.0-17.5% fall in GDP and a 7.5% surplus in the current account.

Risks to the economy and near-future forecasts have eased. With current situation regarding exports and industry showing signs of further improvement and the government making appropriate changes in the central government budget and implementing structural reforms, the economic forecasts may be revised upwards in the future. Low domestic demand and expenditure cuts fostering competitiveness will contribute to price changes in the near future, hence deflation, which cannot be forecast due to persistent foreign market recovery and rise in import prices, is expected next year. Currently the Bank of Latvia's forecast for GDP in 2010 is -2-2.5% and that of annual inflation stands at -3.8%.

The Council of the Bank of Latvia also made amendments to the "Regulation for the Use of the Bank of Latvia's Monetary Policy Instruments" (to take effect on 4 January 2010), updating the provisions with respect to securities accepted as collateral in the Bank of Latvia's monetary operations.

The Council of the Bank of Latvia approved a number of revised regulations for the reporting of statistical information: "Regulation for Compiling the 'Report on Adjustments in Respect of Write-Offs/Write-Downs of Loans and Price Revaluations of Securities' " (it will take effect on 1 May 2010), "Regulation for Compiling the 'Report on Net Open Foreign Exchange Position' " (it will take effect on 1 June 2010), "Regulation for Compiling the 'Report on Money Market Transactions' " (it will take effect on 1 June 2010), "Regulation for Compiling the 'Report and Projections on Long-Term External Debt by Monetary Financial Institutions' " (it will take effect on 1 June 2010) and "Regulation for Compiling the "Reports on Foreign Settlements by Non-Banks' " (to take effect on 1 January 2010).