Situation with increased energy prices could stabilize within months - Kazaks

RIGA - The situation with increased energy prices could stabilize within several months, Bank of Latvia Governor Martins Kazaks said in an interview with TV3 on Friday.

The Latvian government, therefore, needs to think about how to mitigate the impact of price hikes, so that the rise in energy prices does not spill over into other segments of consumption. In his view, it would be necessary to consider cutting the rates of excise duties and the blending of biofuel. In any case, however, it should be borne in mind that it is not possible to isolate price increases completely, but it may be possible to mitigate the impact.

According to Kazaks, it is necessary to assess the situation and develop algorithms for action. Regarding potential support, Kazaks said that it should be short-term and targeted, with a prior assessment of the possible impact on price increases, for example for fuel for farmers.

Looking at the situation in the European economy, Kazaks noted that both the European Union (EU)and Latvian economies are more resilient now than in 2022, when Russia's full-scale invasion of Ukraine began. However, uncertainty is very high, so the situation needs to be kept under close watch to avoid a sharp spike in inflation. The risk of a recession cannot be ruled out if the war in Iran becomes prolonged, but it is important not to exaggerate and to exercise caution.

As reported, according to LETA's estimates, the average price of diesel fuel in Latvia's largest gas station chains has increased by about 28 percent since the escalation of the conflict in the Middle East on February 28, while the price of 95-octane gasoline has increased by 11 percent.

Earlier, after the March 17 government meeting, Economics Minister Viktors Valainis (Greens/Farmers) told the media that two solutions to reduce fuel prices had been considered as the primary ones: reducing excise duty on fuel and limiting excess profits in fuel retailing.

It was also reported that the European Central Bank (ECB) kept its rates unchanged on Thursday. Consequently, the interest rate on the deposit facility will remain at 2 percent, the rate on the main refinancing operations at 2.15 percent, and the rate on the marginal lending facility at 2.4 percent, the ECB said.

These rates have been effective since June 11, 2025.