Rimsevics tinkers with the rates

RIGA -- The Bank of Latvia council decided on Jan. 17 to raise rates onnight deposits from 2 percent to 3 percent.

Speaking at a press conference to announce the change, Bank of Latviapresident Ilmars Rimsevics said that other rates remained unchanged (refinancingrate is 6 percent, and the rate on overnight loans is 7.5 percent).

The Latvian central bank last changed the refinancing rate and rate onovernight loans at the council meeting in May 2007, raising the refinancingrate by 0.5 percentage points and the rate on overnight loans by 1 percentagepoint.

The refinancing rate is one of the main interest rates set by the Bank ofLatvia, influenced by the central bank's lat resources interest rates, thusimpacting the Latvian monetary market rates.

Explaining the move, Remsevics said "Taking intoaccount the fact that the buoyant economic growth is gradually becoming morebalanced and, along with a slower growth in lending, the banking sector'scontribution to the rise in domestic demand is diminishing, there is apossibility to somewhat loosen the so far tight monetary policy framework forthe financial market and thereby enhance the stimuli for the financial sectorto attract long term funding."

At the same time, Rimsevics announced a cutin the mandatory reserve requirement for liabilities of more than two years tobanks and branches of foreign banks from 8 to 7 percent.

The head of the central bank noted that the aim of both moves was to provide"more long-term resources for the economy and more freely accessible creditresources for banks."