Wednesday, Latvia's central bank reduced its refinancing rate by 100 basis points to 4% from 5%, with effect from May 24.

At the same time, the central bank retained the marginal lending facility and marginal deposit facility rates.

The central bank said in a statement that the decision was adopted in view of a continued drop in economic activity, diminishing inflation and the weak lending activity.

The apex bank also said the Latvian economy will contract 16.5% in 2009.

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