OREANDA-NEWS. July 19, 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 resolved to reduce all interest rates set by the Bank of Latvia, reported the press-centre of 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.