Kazak assessed that raising interest rates is still necessary because inflation is still very high and must be slowed down. “In order for inflation not to become a fundamental issue, which is very painful for the economy and the population, an increase in interest rates is necessary,” he said, noting that high inflation can no longer be attributed only to Russia’s invasion of Ukraine.
As interest rates rise, the burden on borrowers becomes greater, however, this is a relatively small part of society. In Latvia, the amount of loans to the economy has decreased very significantly over the last ten years, Kazāks pointed out.
He drew attention to the causes of the inflation observed in Latvia, which can no longer be attributed only to the Russian invasion of Ukraine. “In the first moment, the impact was absolutely clear. It was because of the war in Ukraine – the rise in the prices of energy resources, geopolitical uncertainty, also the problem of supply chains.” However, now some entrepreneurs are likely to continue raising prices with the argument that “all prices are rising”.
The year 2022 ended with annual inflation at the level of 20.8% in December. However, in 2023, inflation has remained at a similar level until now, reaching 20.3% in February. Latvia’s excessively high inflation rates have so far been explained by spending habits. Namely, the prices rose more precisely in those categories that Latvian residents spend the most on – energy resources and food. Contrary to many Europeans, whose consumption basket includes, for example, more entertainment and travel, reports “lsm.lv”.