Consumer prices in Latvia rose by 8.5 pct in March on a 12-month basis and increased by 1.4 pct from February, the national statistics bureau said.

Increases in the prices of clothing and footwear after the end of the winter sales season, as well as of food products and catering services, had the greatest impact on price changes in March, official data showed.

Inflation has been rising progressively in Latvia, causing jitters about credit-fuelled economic overheating in the Baltic state, where growth is the highest in the EU.

In December, 12-month inflation was 6.8 pct, in January 7.1 pct and in February 7.3 pct.

The banks already started to cut down their crediting at the end of last year and in the first months of this year it was even more pronounced -- the free flow of indiscriminate crediting is decreasing.

Last Thursday, the ratings agency Fitch revised downward its outlook on Latvia from 'stable' to 'negative' and warned it may downgrade the country's credit status.

Fitch's move came several weeks after a similar revision by rival ratings agency Standard and Poor's.

Last month, the Latvian government unveiled an ambitious plan for cutting inflation to 2.0-3.0 percent by 2010-11.

Its package includes measures to dampen consumption such as restrictions on issuing personal loans and mortgages, as well as taxation of some property deals and a limit on public sector salary increases.