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Magyar Nemzeti Bank maintains base rate at 9.50%

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1 At its meeting on 3 November 2003, the Monetary Council of the MNB left the central bank base rate unchanged at 9.50%.

2 Hungarian government securities yields have risen strongly in recent days. In the Council's assessment, some market participants have rearranged their portfolios in the face of the events in the Polish and Russian markets, which may explain the rise in Hungarian yields. The sales of government securities have resulted in a massive rise in yields in a market characterised by low liquidity, which in turn has led other participants to close their positions.

The rise in long-term yields in recent days cannot be attributed to changes in economic fundamentals. The Government and the MNB continue to be committed to adopting the euro in 2008. The Council is confident that the recent turbulence in the securities market will wind down rapidly. Conducting open market operations, the Bank has provided assistance in easing liquidity constraints in the market and in consolidating the government securities market as quickly as possible.

The Council maintains its view that the exchange rate should stay in the upper range of the EUR/HUF 250 to 260 band, in order for the inflation objectives to be met.

3 The Council considered the proposal for the 2004 whole-economy wage increases approved at the 28 October meeting of the National Interest Reconciliation Council (NIRC). In the Monetary Council's view, unlike last year's recommendation, this year's, with a gross nominal wages increase as its focus, may help corporate wage growth to adjust to the low inflation environment and contribute to harmonising inflation expectations.

The NIRC's proposal for a 6% increase in the minimum wage and a 7% to 8% nominal increase in gross wages may provide adequate platform for improving economic competitiveness and keeping inflation at low levels. In the Council's assessment, it is important that the outturn for wage growth in 2004 should not be higher than currently proposed.

4 The Council discussed the first version of the MNB's Quarterly Report on Inflation to be issued on 17 November 2003.

5 The Monetary Council set the dates for its scheduled meetings to be held on Mondays in 2004 H1 as follows:

5 January, 19 January, 9 February, 23 February, 1 March

22 March, 5 April, 19 April, 3 May , 17 May,

7 June, 21 June

The dates of electronic publication of the Quarterly Report on Inflation in 2004 H1 are 2 p.m., Monday, 23 February 2004 and 2 p.m., Monday, 17 May 2004. Following electronic publication of the Report, the Chairman of the Monetary Council will hold a press conference to present its statement at 2:30 p.m. The technical consultation with the Economics Department staff following publication of the Report will be held on the set dates at 3 p.m.

23 February 2004

– Electronic publication of the February 2004 Inflation Report at 2 p.m.

– Publication of the Monetary Council's statement at 2 p.m.

– Press conference by the President at 2:30 p.m.

– Technical consultation held by Economics Department staff at 3 p.m.

17 May 2004

– Electronic publication of the May 2004 Inflation Report at 2 p.m.

– Publication of the Monetary Council's statement at 2 p.m.

– Press conference by the President at 2:30 p.m.

– Technical consultation held by Economics Department staff at 3 p.m.