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Statement on the Monetary Council meeting of 18 February 2002

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1. At its meeting held on 18 February 2002, the Monetary Council discussed the latest issue of the Quarterly Report on Inflation and approved its publication.

2. Simultaneously with the strengthening of the forint over the recent period, there has been a tightening of monetary conditions. In the judgement of the Monetary Council, there is no need for the trend to continue in order to meet the Bank's inflation targets of 4.5%±1% at end-2002 and 3.5%±1% at end-2003. Accordingly, the Monetary Council has lowered the central bank base rate by 50 basis points from 9.00% to 8.50%. The decision will take effect on 19 February 2002.

3. The Council also passed a decision on modifying minimum reserve requirements. In terms of the decision:

- the reserve ratio will be reduced to 5% from 1 August 2002,

- the interest rate remunerated on required reserves will be raised to 4.75% from 1 September 2002,

- deposits collected via repo transactions as well as all accruals subject to the minimum reserve requirement, including accrued interest, will be exempted from the reserve base from 1 August 2002.

The Bank's purpose with changing the rules on the reserve requirement is to enhance the competitiveness of the Hungarian banking system and promote regulatory harmonisation with the European Central Bank.