the direct and indirect effects of prices will impede returning the inflation indicator to the goal declared by the eurosystem, i. e. under 2 %, but close to that figure. the extraordinary monetary policy measures implemented by eurosystem continue to be an important factor stabilizing the euro area. the conditions for borrowing have become more favourable both for enterprises and households. the dynamic of loans granted in the euro area continues to improve, yet the speed of recovery is low. therefore, at the 3 december meeting of the ecb council we decided on several measures : • to further reduce the overnight deposit facility interest rate to minus 0. 30 % ; • to extend the expanded asset purchase programme to the end of march 2017 ; • to reinvest the principal amounts of the securities purchased within the expanded asset purchase programme once their term of maturity has set in ; • to include amongst the purchasable assets also secure, investment grade debt securities emitted by local governments ; bis central bankers ’ speeches • to continue to conduct refinancing operations with a set interest rate and full allotment at least to the end of the last reserve requirement period of 2017. the decision taken by the ecb council will mean even cheaper resources at the disposal of latvian commercial banks, households and enterprises. i hope that this loan money will reach households and businesses without an additional surcharge. the costs of servicing the latvian government debt will also continue to drop, which will mean additional savings – and it would be essential not to consume those but to direct them toward implementing structural reforms, thus increasing the country ’ s competitiveness. instead of additional borrowing to make use of the low interest rates, it is important to reduce the public debt, which would have a positive impact on the budget as well. but i will turn to that in a little while. ( chart ) latvijas banka has continued with the expanded asset purchase programme by purchasing securities emitted by the government of latvian and international organizations in the amount of 1. 44 billion euro over eight months of this year. the purchases of latvian government securities by latvijas banka and ecb had reached 630 million euro by the end of october. 2. and now let ’ s turn to latvian economic growth analyses by sector and other criteria indicate that the latvian economy is growing in accordance with earlier predictions and the rate of this growth could be characterized as moderate. given the complicated situation in the external environment, such a result can be considered as satisfactory

and the euro ( fig. 3 * ). with that and the principles just mentioned in mind, the government and the bank of latvia have worked together to develop a three - stage strategy for the introduction of the euro ( fig. 4. * ) : at the beginning of 2005, the lats is pegged to the euro. latvia will strive to join the exchange rate mechanism ( erm ) ii soon thereafter. • in 2007 - spring, at the earliest - the eu institutions give their evaluation of latvia ’ s readiness to join the euro area • after receiving a positive evaluation, latvia would expect to receive an invitation to join the emu. then, at the beginning of 2008, the introduction of the euro will begin. let us explore each stage in more detail. first - about the first stage that is only a couple of months away. that is - about the change of the lats ’ peg and the chosen exchange rate level between the lats and the euro. we have considered all arguments and summed up all the pluses and minuses. as most of you may know, the bank of latvia has made a decision to peg the lats to the euro on january 1 of 2005 in accordance with the market rate. this market rate would be registered on the last business day, december 30, 2004. by pegging the lats to the euro, the bank of latvia will neither increase nor decrease the value of the lats : it will neither be devalued, nor re - valued. use of sdr formula in setting lats exchange rates to better understand the basis for our decision, it might be helpful to remind ourselves of the mechanism whereby the exchange rate between the lats and the euro is set at present. as you know, the lats is pegged to the sdr basket of currencies, the imf unit of settlement - the bank of latvia ’ s official exchange rate between the lats and the sdr is 0. 7997 : 1. it has remained unchanged since the beginning of the peg in february 1994. taking into account the exchange rates between the currencies in the sdr basket and the fixed exchange ratio between the lats and the sdr basket, the official lats ’ rate against the other currencies, including the euro, is also determined every business day. since the mutual exchange rates of the principal world currencies, which are all part of the sdr basket - the us dollar,