Latvijas Banka Holds Refinancing Rate at 3.50%

Latvijas Banka held its main monetary policy interest rate, the refinancing rate, unchanged at 3.50%, and held its other interest rates unchanged.  The Bank said: "In view of the fact that the current inflation risk factors are not related to a rise in demand and that risks for price stability in the medium term are limited, the Bank of Latvia Council today resolved to leave unchanged the interest rates set by the Bank of Latvia and the mandatory reserve requirement in place for the banking sector."

Previously the Bank also held monetary policy settings unchanged, leaving the refinancing rate at 3.50% at its May meeting.  The Bank of Latvia last reduced the refinancing rate by 50bps to 3.50% in March 2010.  Latvia reported annual inflation of 5% in May, up from 4.5% in April, with the Bank noting: "Even though inflation has been on the rise in recent months, it has been, as before, on account of several temporary factors: the rises in global oil and food prices and Latvian tax rates.  It can be predicted that in the medium term inflation will moderate, and the annual average inflation will return to the 2.5-3% level."

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