For quite a while now, the main problem of the Latvian economy has been the overly high domestic demand that exceeds supply; the economists call it “overheating” of the economy. The budget deficit is also too high for this juncture in our economic development: we are not saving for the moment when the pace of the economy will abate.
7  ​Strong capital inflows led to a forceful policy response  Swiss contagion to Danish FX market 15 January 2015 Kroner per euro 7.430  Swiss announcement  Bid-ask spread, pips 25 Widened bid-ask spread (right-hand axis)  7.432  20  7.434  15  7.436  10  7.438  5 Increased exchange-rate volatility  7.440 09:00  10:00  11:00  12:00  13:00  14:00  15:00  0 16:00  Note: Left-hand axis: Reversed scale.