Rimsevics tinkers with the rates

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

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

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

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

Explaining the move, Remsevics said "Taking into account the fact that the buoyant economic growth is gradually becoming more balanced and, along with a slower growth in lending, the banking sector's contribution to the rise in domestic demand is diminishing, there is a possibility to somewhat loosen the so far tight monetary policy framework for the financial market and thereby enhance the stimuli for the financial sector to attract long term funding."

At the same time, Rimsevics announced a cut in the mandatory reserve requirement for liabilities of more than two years to banks 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 credit resources for banks."