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Statement on the Monetary Council meeting held on 21 August 2001

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1 At its meeting on 21 August 2001, the Monetary Council considered the latest economic and financial developments and found that there was no need of central bank intervention, or to alter the current monetary conditions. In view of information available for the assessment, the Council judged the recent fluctuations in the forint exchange rate to be short-lived, which did not endanger the achievement of inflation objectives the Bank had set.

2 In agreement with the government, the Monetary Council accepted to abandon the crawling peg devaluation of the forint with effect from 1 October 2001, and to fix the central parity of the currency vis-a-vis the euro at the then deriving HUF 276.1. The role of crawling-peg devaluations of the forint under the narrow currency band regime, aimed at guiding inflation expectations, was replaced by inflation targets following the implementation of the system of direct inflation targeting. The abandonment of the crawling peg exchange rate regime constituted another step towards the exchange rate mechanism of the European Union.

3 The Council discussed and approved the Bank's reserve management and risk-taking policies for 2001. Reviewing the latest movements in foreign exchange reserves, the Council judged that their current level and structure were adequate.

4 The Council also reviewed the preparations by the Bank and the related tasks to be performed in respect of the introduction of euro banknotes and coins in the member countries of the European Union on 1 January 2002.