Latvia Ctrl Bk Holds Key Rate At 4%, Adjusts Econ Forecasts

 
   DOW JONES NEWSWIRES 
 

Latvia's central bank Thursday left its key interest rate unchanged at 4%, but adjusted its full-year economic forecasts.

The central bank said both lending and deposit rates are low to support the interbank money market and help banks channel lending into the local economy.

It added that future economic and financial market growth hinges on approval of the 2010 budget, which is up for a first vote in Parliament Thursday. Policy-makers must approve the budget in a second reading before it passes.

"The [budgetary approval] 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 central bank said in a statement.

The bank also said it has adjusted its economic forecasts for 2009, projecting the annual rate of inflation at 3.6%, along with a drop in gross domestic product of 17.0%-17.5% and a 7.5% surplus in the current account.

"Risks to the economy and near-future forecasts have eased," the bank said. "With the 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, in the future the economic forecasts may be revised upward."

It added that weak domestic demand and public spending cuts will put pressure on prices, with possible deflation next year.

Company Web site: http://www.bank.lv

-By Anna Molin; Dow Jones Newswires; +46 8 545 130 91; anna.molin@dowjones.com

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(END) Dow Jones Newswires

November 05, 2009 07:55 ET (12:55 GMT)


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